While simultaneous hikes in the interest rate and banks' reserve requirements have grabbed domestic attention, the global market may be more interested in the trading band adjustment of the yuan.

The central bank announced on Friday an increase in the yuan's daily trading band against the US dollar of 0.5 percent, a move that signifies the renminbi is becoming more flexible.

It will, at least partially, convince those who have doubted China's sincerity in pushing the reform of the yuan's foreign exchange rate.

Skeptics have interpreted the increase in the flexibility of the yuan as a pacifying gesture ahead of the second round in the strategic economic dialogue between Beijing and Washington scheduled for Tuesday and Wednesday.

This explanation of the yuan's adjustment ignores China's strategic target of gradually opening its capital accounts - the movement of funds for investments and loans into and out of the country - and making the renminbi more flexible. This criticism is part of the same thinking that ignores the country's resolve to seek its own reform tempo regardless of outside pressure.

Beijing certainly wants the upcoming strategic economic dialogue to fare well. But it will not sacrifice fundamental interests simply for a goodwill gesture.

Reform of the exchange rate must remain gradual. Any drastic adjustment would destabilize the Chinese economy.

China has not stood still. It has been improving management of its financial sectors, enriching its foreign exchange market by building a multi-tier market place, and devising more foreign exchange tools to resolve risks that may arise as the yuan is revalued.

Meanwhile, China is working to stabilize its economy, preventing it from being derailed by overheating. This lays the foundation for the smooth progress in the yuan's foreign exchange rate reform.

As the country's economic and financial soundness improves, the authorities are making the yuan more flexible.

China is moving consistently in this direction in line with its economic and financial well-being.

Source: China Daily