China to Allow Facebook, Twitter Access in Shanghai Free Trade Zone (Report)

Access to Western social media and other sites will most likely be restricted to the 11-square-mile zone set to launch this month in the country's financial center.

Chinese Internet users might soon be able to access Facebook, Twitter, the New York Times and other banned websites -- but only within a groundbreaking free trade zone set to launch this month in the country's financial hub, Shanghai.

The central government wants to promote Shanghai as a financial capital to rival New York and London, and is setting up a free trade zone (FTZ) in the city's glitzy financial precinct, Pudong.

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Beijing is prepared to allow Internet users within the FTZ, which will emulate Hong Kong's free-wheeling form of capitalism, to freely access politically sensitive websites, Hong Kong's South China Morning Post newspaper reports.

The free trade zone has been compared to the rules allowed by former supreme leader Deng Xiaoping, who decided to open up the Shenzhen special economic zones to foreign investors about three decades ago, which sparked China's ongoing economic boom.

"In order to welcome foreign companies to invest and to let foreigners live and work happily in the free-trade zone, we must think about how we can make them feel like at home," the newspaper quoted an unnamed government source as saying.

"If they can’t get onto Facebook or read the New York Times, they may naturally wonder how special the free-trade zone is compared with the rest of China," the source said.

China's Communist Party enjoys the business opportunities offered by the Internet but is wary of the platform it offers for dissent and any questioning of single-party rule.

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The Times was blocked last year after it reported that the family of ex-Premier Wen Jiabao had amassed a huge fortune, while Bloomberg News' website was similarly blocked for a report on the financial holdings of the family of President Xi Jinping.

Other sites have been blocked for longer. Facebook and Twitter were blocked by Beijing in mid-2009 after riots in the restive western province of Xinjiang, which authorities say were boosted by the social networking sites.

Authorities are anxious that Twitter and Facebook could help "undermine social stability," as they did during the Arab Spring and other incidents of political unrest in recent years.

The authority in charge of the FTZ, which is believed to have the crucial backing of current Premier Li Keqiang, would also welcome bids from foreign telecoms companies for licenses to provide Internet services within the new special zone.

The decision to open up the Internet will apply in the 11 square mile zone (28.8 square-kilometers), and no other areas.

Authorities see the FTZ as a testing ground for various financial innovations, including free currency exchange -- China's currency is not currently a tradeable currency.

Among the big changes is an easing of capital controls for firms in the zone, which will technically allow yuan convertibility and access to global financial markets. It includes the Waigaoqiao duty-free zone, Yangshan deepwater port and the international airport area.

The plans envisage the removal of restrictions on bank interest rates, and both domestic and foreign banks will be allowed to offer a broader range of financial services.

The FTZ was approved by the State Council, China's cabinet, in late August.

While it's hard to establish a link, the move comes just days after Facebook's chief operating officer Sheryl Sandberg came to Beijing on a visit, ostensibly to promote her book Lean In – Women, Work and the Will to Lead.

Most Chinese webizens use Sina Weibo and other microblogs and they have proven wildly popular as a form of expressing unhappiness with the failings of government, prompting a crackdown on online activity in recent months.

Mark Williams and Qinwei Wang at financial analysis firm, Capital Economics, were broadly welcoming of the reform plans in a research piece they released on Tuesday.

"A great deal remains uncertain. Our best guess, though, is that the Shanghai FTZ will act as a proving ground for reforms before they are rolled out elsewhere. In this regard, we’d see it as a means to achieving the government’s long-stated intentions of gradually opening up the service sector and the capital account without in itself accelerating either process," they said. 

Meanwhile, in a related story, a 16-year-old high-school student detained under new legislation aimed at tightening control of the Internet was released from custody.

Yang Yong, 16, from the Zhangjiachuan Hui Autonomous County in Gansu Province, was detained for questioning a police investigation into a suicide he said was murder.

He was held under new rules aimed at stopping slanderous comments online. The new rules mean that webizens can face up to three years in prison if their statements are visited by more than 5,000 Internet users or re-tweeted more than 500 times.

Shanghai's free trade zone will be formally launched on Sept. 29, the Securities Times reported earlier this month.