In the meantime, industry investment funds and fund management companies will also be set up at the Binhai New Area to pool funds directly from the domestic and international financial markets.

One of the problems that have been plaguing China's financial system is that pooling funds directly from the open markets accounts for a small proportion of the entire fund-raising in the country.

Currently, the proportion of direct fund-raising only stands at 4 percent, compared with 9 percent in 1994.

With money raised indirectly, enterprises will suffer due to a high ratio of liabilities, heavy financial burdens, low innovation capabilities and weak capabilities to hedge risks, according to Dai.

Dai disclosed that the Bohai industry investment fund, with the participation of six companies and a limit of 6 billion yuan for the first phase, as well as a new special fund management firm with 100 million yuan in capital, will soon be launched.

Measures will also be introduced to reform the foreign exchange management system at the Binhai New Area, according to Dai.

Enterprises will be allowed to settle exchange freely at the Binhai New Area. The current common practice toward the control of foreign exchange in most parts of the country is that enterprises should sell all the hard currencies to banks only as required after having paid off obligations arising from foreign trade.

Also inside the Binhai New Area, China's currency, the RMB yuan will be convertible within a set limit and designated districts.

The plan, which still needs improvement, will be executed after the Central Government gives it the go ahead, according to the mayor.

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