China opened a new free trade zone in Shanghai today in what

China opened a new free trade zone in Shanghai today in what has been hailed as potentially the boldest reform move in decades, and gave fresh details on plans to liberalize regulations governing finance, investment and trade in the zone.

The Shanghai FTZ, which covers an area of nearly 29 sq km on the eastern outskirts of the commercial hub, was approved by China’s State Council, or cabinet, in July.

State-run Xinhua news agency quoted Commerce Minister Gao Hucheng as saying that the creation of the FTZ was a crucial decision for China’s next wave of reform and opening-up.

The State Council said on Friday it would open up its largely sheltered services sector to foreign competition in the zone and use it as a test bed for bold financial reforms, including a convertible yuan and liberalized interest rates.

Economists consider both areas key levers for restructuring the world’s second-largest economy and putting it on a more sustainable growth path.

Some Chinese and foreign firms have already moved to set up subsidiaries in the zone. A total of 25 companies so far have been approved to set up operations in a variety of sectors, alongside 11 financial institutions, most of which are domestic banks but including the mainland subsidiaries of Citibank and DBS.

Regulations of Chinese and foreign banks will also be eased, said Liao Min, head of the Shanghai branch of the China Banking Regulatory Commission (CBRC), adding the CBRC will adjust loan-to-deposit ratios and other regulatory requirements for banks in the zone.

Source yahoo.com