SHANGHAI, China (AFP) — China’s yuan has sunk by around four per cent in August to its lowest point in more than 11-years yesterday, a decline likely to further exacerbate trade tensions with Washington.

Here are three things to know about the yuan’s slide:

Why has the yuan depreciated?

Because China is allowing it to.

China limits the yuan’s daily fluctuations against the dollar by setting a daily benchmark rate and allowing the unit to trade within a two per cent range on either side of that.

This is aimed at balancing actual forex market trends with the need to guard against the precipitous swings that can occur in China’s immature capital markets.

But China has steadily set the rate at a weaker point in recent weeks — and apparently stopped using its foreign exchange reserves to prop up the yuan — as the trade war with Washington has turned increasingly hostile.

What does China get out of this?

A weaker yuan cushions the blow of US President Donald Trump’s escalating trade tariffs, imposed beginning last year to pressure China to change what Washington considers unfair trade practices.

The US has slapped tariffs on vast amounts of Chinese goods, which makes them more expensive and thus less attractive to US buyers. A weaker yuan, however, means those same goods can be sold at lower prices, ameliorating some of the tariff impact.

China’s economy was already slowing considerably before the trade war, and policymakers in Beijing are keen to prevent a further economic blow arising from a tariff-crippled manufacturing sector.

What are the risks for China, and the world?

For China, a Twitter tirade is a fairly good bet.

China critics in the United States have long accused Beijing of holding the yuan below market value to gain an export edge, and an even weaker yuan is likely to add fuel to that.