State Council gives green light to Shanghai free-trade zone

In a move underlining the leading role Shanghai will play in the country's economic future, the cabinet has formally endorsed the city's plan to open the mainland's first free-trade zone.

The free port will be a testing ground for major policy reforms to free up cross-border commodity and capital flows, areas in which it threatens to eclipse Hong Kong's traditional contribution to the national economy.

The State Council said in a statement after a meeting chaired by Premier Li Keqiang that the free-trade zone would be a snapshot of an "upgraded Chinese economy".

Economists said the plan, aimed at eventually creating a "mini-Hong Kong" in the mainland's commercial hub, would benefit Shanghai as the city sought new engines to revive its slowing economic growth.

"The approval will help China gain new advantages in global competition," the cabinet statement said. "It will help build a new platform for economic co-operation with other countries and pave the way for further economic growth."

Initially, Shanghai will upgrade and expand its existing four bonded areas, where goods can be imported, processed and re-exported without the intervention of customs authorities.

Government officials said the free-trade zone would eventually become a large territory and undertake financial liberalisation.