China bowed to months of market and political pressure on Thursday by revaluing the yuan by 2.1 percent and abandoning the currency’s decade-old peg against the dollar, Reuters reports.

China’s central bank said the yuan’s value from now on would be linked to a basket of currencies of China’s main trading partners.

Beijing had been under strong pressure from its trading partners, especially the United States, to abandon the yuan’s peg of 8.28 per dollar, which they said undervalued the currency and handed Chinese exporters an unfair advantage on world markets.

The new rate, initially, will be 8.11 yuan per dollar, well short of the 10 percent revaluation that Washington had been seeking to head off protectionist pressure in Congress.

From now on, the yuan, also known as the renminbi (RMB), will be allowed to move in a tight range of 0.3 percent up or down from the previous day’s close, the central bank said, leaving open the possibility of further incremental revaluations.

“The People’s Bank of China will make adjustment of the RMB exchange rate band when necessary according to market development as well as the economic and financial situation,” the central bank said in a statement in English on its Web site. “The RMB exchange rate will be more flexible based on market conditions with reference to a basket of currencies.”

Bakul Mehta, chairman of the India Gem & Jewellery Export Promotion Council said that the revaluation of the Yuan “is long overdue” and that India will benefit.

“With the revaluation of the Yuan, the Chinese product will be a little expensive, as their labor cost will increase with respect to the dollar,” Mehta said in a statement. “Though this is not enough, it is a welcome change. Also, now imports into China will be inexpensive and India’s gem & jewelry sector will view China as a potential consumer market. Hence, this move will benefit the Indian gem and jewelry industry immensely.”

JCK