Echoing elevated market volatility, China's FX reserves posted their largest single monthly decline in December, supporting sustained capital flight. Given its falling reserves, the PBoC is now seen with limited ability to reverse market sentiment in the medium term.

Capital controls could be a less costly alternative for the PBoC, however, the government would need to consider this option carefully, given its broader agenda of RMB internationalization and capital account liberalization.

China 2015 GDP data is due for release tomorrow, Tuesday 19 January, Barclays forecasts are as follows: 2015: 6.8%; 2016: 6.0%. Overall, there are few signs of stabilization and continued headwinds to the outlook, as suggested by recent data and market developments. In our view, this points to macro policies remaining accommodative for an extended period, notes Barclays.