China's central bank said on Sunday it would keep the yuan at a reasonable, basically stable level, and that there will be no one-off revaluation, after the government said it would make the currency more flexible.

China said on Saturday it would gradually make the yuan more flexible, in a gesture that may deflect foreign criticism at next week's G20 summit but will not quickly yield a big move by its currency.

China's announcement that it will resume currency reform made waves globally but caused barely a ripple at home on Sunday, with major newspapers merely reprinting the central bank's statement.

Leaders of the United States, the European Union, Japan and the International Monetary Fund, among others, all welcomed the move as a hopeful contribution to balancing the world economy.

Chinese economists who spoke to clients and foreign reporters said it was a step that was justified economically and, above all, had a political aim.

'This important declaration by the Chinese government coming before the G20 summit is a big concession to prevent the yuan's exchange rate from being politicized by Western countries,' said Gao Shanwen, chief economist at Essence Securities in Beijing.

Global equity markets may rally on Monday as the news, coming a week before a Group of 20 meeting in Canada, eases fears of a trade row between the United States and China at a delicate time for the world economy.

The People's Bank of China said in its statement that holding the yuan in a de facto peg to the dollar since July 2008 had helped mitigate the impact of the global financial crisis and spur the world's recovery.

With the economy on a more solid footing, it was time to enhance the exchange rate's flexibility, though the basis did not exist for 'large-scale appreciation,' it said.

All eyes on Monday will be on the daily reference rate set by the Chinese central bank to manage the yuan's value. Many economists believe that Beijing will nudge the exchange rate higher in increments, not leaps.

Markets have long been waiting for China to break the yuan's peg to the dollar, but the timing still came as something of a surprise.

One day earlier, senior officials had stressed that China would not be bullied into resuming yuan appreciation. - Reuters