Using the layered circulation in the South China Sea (SCS) as an example, a process-oriented simulation was conducted to explore how the lateral exchanging current and basin circulation responded to the contrasting mixing in the marginal sea-open ocean system and to the internal modulation over basin slope. Under conditions of intensified turbulent mixing ((Formula presented.)) in the SCS, a crossing Luzon Strait density difference was generated and the net ageostrophic pressure gradient force drove the layered exchanging current with intensified westward deep intrusion into the SCS and an eastward middle outflow. The lateral exchanging current in turn developed a layered basin circulation in the semi-enclosed middle and deep layers through directly providing external planetary vorticity flux, and releasing the internal potential energy indirectly. The vertical migration of the layered circulation structure over bottom slope owing to flow-topography interaction is the major intrinsic response to the external exchanging current particularly in the semi-enclosed deep basin. Although a small (Formula presented.) was adequate to maintain the basic layered circulation pattern, an intensified (Formula presented.) was required to extend the deep cyclonic circulation to the bottom. The intrusion of the western boundary current from open ocean not only maintained the strong upper cyclonic circulation but also intensified deep intrusion and modulated the deep layer circulation through vertical coupling. Both the deep density difference between the SCS and open ocean as well as associated vertical coupling should be considered to well understand the intensity of water exchange and the consequent layered circulation in the SCS.