China is considering changes to the way it calculates the yuan'sdaily reference rate against the dollar, a move that's likely toreduce exchange-rate volatility while undermining efforts toincrease the role of market forces in Asia's largest economy.

Policy makers may add a “counter-cyclical factor” to the yuan'sdaily fixing, according to a government statement Friday, whichconfirmed an earlier report by Bloomberg News. Analysts said thechange would give authorities more control over the fixing andrestrain the influence of market pricing.

While a more tightly managed currency could provide Chinabreathing room to push forward with a deleveraging campaign that'spopular among foreign investors, it would mark a step back fromPresident Xi Jinping's 2013 pledge to give markets a central role.The central bank's existing fixing system won internationalplaudits for being market-oriented and helped the yuan gain a spotin the IMF's basket of reserve currencies.