Jan 8 (Reuters) - The pace at which China's yuan drops is more important than how far it falls as a drop will help efforts to stimulate the economy and is fine so long as traders and investors are prepared for it.

That's why the pace of the slide is so important, as a controlled decline allows time for traders to adjust, and when they are prepared they can profit from a move that chimes with policy.

The need to manage the slide has probably never been higher than it is now as USD/CNH is closing on the 7.3746 record high, and there will be major interests at nearby big numbers like 7.40, 7.45 and 7.50, that could spark a surge in volatility if crossed swiftly.

With more than 3 trillion dollars of FX reserves, the central bank has the means to effectively manage the yuan through any situation, and unlike many emerging market central banks, does not need to rebuild reserves after any interventions, so the rebalancing operations that often follow other interventions in Asia, won't necessarily underpin the dollar if China's central bank sells USD/CNH.

That said, the strength of the yuan which has recently risen significantly is a growing problem, as it is undermining the economy at a bad time. While the central bank needs to control the yuan, it would help if it declines, and an effective way to offset the CNY's rise vs the FX basket that's used to determine policy is to tolerate a bigger USD/CNY rise.

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(Jeremy Boulton is a Reuters market analyst. The views expressed are his own)

((jeremy.boulton@thomsonreuters.com))