Banks can now set their own exchange rates for the yuan against the dollar in over-the-counter transactions – another step toward freeing the exchange rate from government control.

Banks were previously required to price the yuan/dollar rate they offered retail clients within 3 percent in either direction of the Chinese central bank’s daily middle rate.

“The liberalization of the retail market implies that the People’s Bank of China believes that the yuan has now reached equilibrium,” said Cao Yang, an analyst at the Shanghai Pudong Development Bank Co Ltd.

The move is aimed at further perfecting the mechanisms to establish a market-oriented exchange rate for the yuan.  The world’s second-largest economy is seeking to increase the use of the yuan in global trade and investment to reduce China’s dependence on the US dollar. The move is also aimed to reduce the exposure to the economic policy decisions made by global financial institutions, in which Washington has a big influence.