China signals 'deep-water' reform

It is also worth noting that the central bank did not ease its controls over mortgage rates, indicating that the government is not pleased with rising property prices.

Out of a statistical pool of 70 Chinese cities, 63 saw month-on-month home price rises in June, down from 65 cities that reported higher prices in May, the National Bureau of Statistics reported Thursday.

As China's economic reform deepens, the former growth pattern that focused on investment and exports was found to be unsustainable, the latest in what experts call the surprising tumbles of exports and imports.

Exports dropped 3.1 percent year on year to $174.32 billion, while imports declined 0.7 percent from a year earlier to $147.19 billion, according to the General Administration of Customs.

"Europe is still struggling to recover from a steep downturn and the quantitative easing in the global economy will add to uncertainties," said Zhuang Jian, an economist at the Asian Development Bank.

Investors were calmed by US Fed Chairman Ben Bernanke's testimony to Congress this week. Bernanke told the Senate Banking Committee on Thursday that it was "way too early to make any judgment" as to whether tapering will start in September.

Wary of renewed market volatility, the Group of 20 (G20) nations on Friday pledged to shift policy carefully and communicate clearly as they navigate a path toward recovery.

The latest move by China's central bank left a ceiling on deposit rates unchanged. "That is the most critical and risky part of interest rate market reform as shown by other countries' experiences," said the official with the central bank.

The removal of deposit rate ceilings in the United States resulted in massive bank failures in the 1970s and 1980s.

China's reform of interest rates began in 1996. The central bank has vowed to liberalize deposit rates in a "steadily and orderly" manner.