June 21 (Reuters) - China's move to allow greater currency flexibility will raise pressure on exports in the short term, but will be good for competitiveness in the long run, state media on Monday quoted a Commerce Ministry official as saying.

Ministry spokesman Yao Jian told the official Xinhua news agency that yuan reform could put pressure on exports initially, as firms were likely to face higher material costs.

Rising labour costs and the debt crisis in Europe would also affect China's exports, Yao was paraphrased as saying.

In the long run, however, export businesses would improve business management and expand the industrial chain to make themselves more competitive internationally, he added.

International payments (are) the most important factor determining exchange rates, Yao said.

The improved situation of China's international payments at present, especially the large decline of China's trade surplus, (provide) a good basis for the reform of the yuan exchange rate.

China scrapped a 23-month-old peg to the dollar on Saturday, just a week ahead of a G20 summit in Canada, and following pressure from the United States to free up the currency.

The Commerce Ministry had been one of the staunchest opponents of de-pegging the yuan. The comments are an indication of how the government has been able to forge a consensus to let the currency float more freely. (Reporting by Ben Blanchard; Editing by Toby Chopra)

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