China opens 1st pilot free trade zone in Shanghai, billed as major step for financial reforms

Operations formally kicked off Sunday at a new free trade zone in Shanghai that China's government has billed as a major step for financial reforms and economic experimentation, but significant changes look to be years away.

State media reported that a first batch of 25 Chinese and foreign companies were granted licenses to register in the zone.

The China (Shanghai) Pilot Free Trade Zone is a nearly 29-square-kilometer (11-square-mile) district that covers four existing special trade zones in Pudong district, including one at the airport.

China's State Council formally announced rules for the new free trade zone on Friday. They include measures to cut red tape and restrictions for foreign investment in the country's tightly controlled service industry.

There are also plans to experiment with convertibility of China's tightly controlled currency, the yuan, and let market forces rather than regulators set interest rates.

The zone is aimed at serving as a laboratory for such financial experiments before they are rolled out elsewhere in China.

The Shanghai zone has been touted as the most important attempt at economic reform since the creation of the country's first special economic zone in 1980 in Shenzhen, next door to Hong Kong.

That zone was aimed at harnessing cheap labor to build a manufacturing industry.