The market is set to play a bigger role in deciding the exchange rate of the yuan as part of the government's efforts to stabilize trade, the State Council said yesterday.

"China will further improve the foreign exchange system and make it more market driven," it said in a statement.

"Our currency will have greater elasticity in its two-way movement," the statement said.

Exchange rates will stabilize at a "reasonably balanced" level, and the government encourages the creation of risk-hedging financial products to help traders control risks, it said.

Other efforts to stabilize trade include a further reduction of administrative red tape, the development of more model trade zones to nurture competitive importers and exporters, and optimizing the trade structure to give greater emphasis to higher- added-value products, such as those that use new technology or have a strong brand or broad distribution network.

The government will also take steps to deal more effectively with trade conflicts, the statement said, adding that it encourages the creation of export credit insurance and financial products that help exporters contain the risk of payment defaults.

At the same time, traders must be better disciplined and not use damaging practices in the pursuit of a competitive edge, it said.

Importers will also be supported, and the government encourages local firms to invest more in their global expansion, the statement said.

Lu Zhengwei, chief economist at Industrial Bank, said the statement makes clear the prominence the government gives to trade as a driver of the economy.

"Exports remain a core element for growth," Lu said. "The rising contribution of exports does not mean China is scaling back its efforts to reduce reliance on external demand."

Trade is not just about stabilizing growth, but also accelerating the process of integration between China and the rest of the world, he said.

Xue Jun, an analyst with CITIC Securities, said the measures outlined in the statement constitute a comprehensive approach to improving trade, even if some of the phrasing is vague at this stage.

"The government is really serious about trade," Xue said.

"Different from in the past when the government stressed only currency stability, this time it said there will be increased elasticity in the yuan's movement, stoking expectations of a bigger fluctuation against the US dollar," he said.

The People's Bank of China in March doubled the yuan's daily trading range to 2 percent after three months of weakening. The yuan has lost 3.5 percent from a record high of 6.04 to the dollar on January 14 in what economists believe was a central bank-engineered move to squeeze foreign capital betting on its appreciation.

The weaker currency has also given exporters an incentive to test the still lukewarm waters of external demand.

China's trade rose marginally last month, with exports up 0.9 percent - reversing a 6.6 percent dip in March - and imports up 0.8 percent, turning around an 11.3 percent slump a month earlier. Trade value in the first four months, however, was down 0.5 percent year on year.