Beijing said yesterday it would legalise Wenzhou's controversial underground banking sector and allow the city's residents to make direct investments abroad.
The two decisions represent significant steps in liberalising banking and investment on the mainland, observers said. Hong Kong could benefit from the investment scheme since the city is often the first choice of mainlanders who want to take money abroad.
At a work conference chaired by Premier Wen Jiabao yesterday, the State Council granted Wenzhou - plagued by a series of scandals involving illegal private lending last year - the status of a 'special financial zone', according to Xinhua.
This effectively launches a long-expected reform of the Zhejiang city's financial sector.
The decision comes as Wu Ying, a businesswoman sentenced to death for 'raising funds with intention to defraud', awaits a review of her sentence by the nation's Supreme Court. Her case has drawn unprecedented calls for mercy.
Wenzhou will have to formulate rules to regulate the formerly illegal private fund-raising operations.