Economists from HSBC Holdings Plc said on Tuesday that a weaker renminbi is a natural consequence of opening capital markets and looser policy.

David Bloom, global head of foreign exchange strategy of HSBC, said: "The difference between China and the rest of the world is that the Chinese currency is weakening as a natural consequence of a slowing economy, unlike in the West where it's a deliberate policy to weaken currencies."

He emphasized that what the markets worried about is not the weakness of the renminbi but the speed at which it is weakening.

"We're looking for a slightly weaker renminbi of about 6.7 against the US dollar by the end of this year," he said.

The overnight CNH Hong Kong Interbank Offered Rate hit a record high on Tuesday, surging to 66.8 percent from 13.4 percent on Monday and 4 percent last Friday.

Speaking of the volatility, Bloom said this is nothing unusual and China should get used to it.

"When you are in a world of open capital accounts in a $5.25 trillion a day market, markets move around aggressively and you don't always get what you want," he said.

There are many mechanisms to be used to calm the volatility. The authorities are acting in Hong Kong to calm the CNH, which is having an impact, he added.

Qu Hongbin, co-head of Asian economic research at HSBC, said China is facing a more severe economic situation in 2016 compared with the previous year and may suffer deflation and downward spirals.

In these circumstances, China needs to implement a basket of policies, among which fiscal policy is particularly important.

He urged the government to implement a more proactive fiscal policy by taking measures such as lowering corporate taxes and fees and expanding the deficit.

Reform measures also need to be taken to increase demands, he said. For instance, the government could include migrant workers in the scope of low-rent housing, providing them with houses purchased from the market at a discount, rather than holding unrealistic expectations for migrant workers to buy commercial flats on their own and reduce excess housing stock.