BEIJING, Aug. 13 -- The central People's Bank of China (PBOC) announced to improve its central parity system to better reflect market development in the exchange rate between the Chinese yuan RMB against the U.S. dollar on Tuesday.

The PBOC said the RMB's central parity has deviated from its actual market rate by a large extent and for a long duration, which has undermined the benchmark status and authority of the central parity system.

Following the change, the RMB central parity rate sharply decreased by 3.5 percent over the last two days as compared to that on Monday.

According to the central bank, the improvement of the central parity system can contribute to a more market-oriented exchange rate system and better bring into play the role of exchange rate in adjusting supply and demand of foreign exchange.

The central bank pledged to closely monitor market movements, stabilize market expectations and make sure the central parity of RMB formats in an effective and orderly manner.

The reform of the RMB exchange rate formation mechanism will continue in a more market-oriented direction, give greater play to the decisive role of the market supply and demand to promote international balance of payments, the central bank said.