China's central bank says it will allow more exchange rate flexibility but says there is no basis for a large-scale appreciation.
Saturday's statement by the People's Bank of China gives no specifics. Chinese officials this year have promised currency reforms but also said the changes would be gradual.
The yuan has been frozen against the dollar since late 2008 to help Chinese manufacturers compete amid weak global demand, and China has been under pressure from the United States and other countries that say the yuan is undervalued.
Chinese officials in the past week have warned that any adjustment to the exchange rate is not other countries' concern.
President Hu Jintao will likely be pressed on the issue at next week's G-20 meeting in Toronto.
U.S. Treasury Secretary Timothy Geithner said Saturday he welcomed China's announcement that it would make its yuan exchange rate more flexible, and called for "vigorous implementation" of the change.
"We welcome China's decision to increase the flexibility of its exchange rate," Geithner said in a statement released by the U.S. Treasury Department. "Vigorous implementation would make a positive contribution to strong and balanced global growth. We look forward to continuing our work with China in the G20 and bilaterally to strengthen the recovery."
China's announcement is encouraging but probably not enough to satisfy U.S. lawmakers pushing for a major appreciation, a senior Senate aide said Saturday.
"This is encouraging but I don't expect it will ever be enough for the currency hawks in Congress," the aide told Reuters on condition of anonymity.