The People’s Bank of China last week widened the yuan’s daily trading band from 0.5 percent to 1 percent. In the short term, the Chinese central bank will continue to intervene in currency markets to ensure that no major fluctuations damage China’s struggling export industries. Nevertheless, the measure is a step toward a more market-based exchange rate that will also internationalise the country’s currency.

US Treasury Secretary Tim Geithner welcomed the move as “very significant and very promising.” The Obama administration has long pressured China to institute a more flexible yuan and further open up its financial sector. International Monetary Fund (IMF) head Christine Lagarde declared: “It’s not a baby step, it’s a very good step in the right direction.”