It said the exchange's main business would comprise entering into contracts among the banks and between banks and clients which specified the quantity, interest and settlement date for the foreign currencies traded.

Standard Chartered Bank treasurer Stanley Wong said Shenzhen, with a large external economy and foreign trade, should have the potential to develop a foreign exchange futures market.

He said it was good to see the Chinese authorities make bold reforms in the financial market.

''There have already been six to eight different kinds of futures exchanges in China, and it is just the right time to have one in foreign currency,'' he said.

Mr Wong said the currency futures exchange in Singapore was linked to the Chicago exchange in order to maintain round-the-clock trading.

If Shenzhen set up a futures exchange, it must consider building a linkage with an international exchange, he added.

The news agency did not give further details on the structure and operation of the exchange.

Beijing had earlier called for curbs on the setting up of futures exchanges to better control China's rapid economic development.

The Hongkong Futures Exchange recently joined the local Standard Capital Group and China's Nanjing Petroleum Exchange in the clearance of the newly-formed exchange's futures contracts.

However, trading volume on the Nanjing exchange has shrunk since its opening early last month, raising questions about whether the Chinese authorities' bold experiments with the market were simply a blind jump into the unknown.