The idea that these foreign banks can participate in equity and capital markets freely in the FTZ will mean more capital for the economy, which "also takes stress off the central bank", said Gutierrez.

"The next big opportunity is, in general terms, services — specifically financial services — and to open up financial services can be the next engine for economic growth for China," said Gutierrez, who served as vice-chairman of Citigroup Inc's institutional clients group.

Christopher Wells, a partner at Bingham McCutchen, a global law firm with offices in China, said that lifting some restrictions on financial services is just a very "modest" change.

"All financial markets that compete with Shanghai — Hong Kong, Singapore, Frankfurt, New York, London, Paris, Los Angeles, San Francisco and Sydney — already allow this and have allowed it for decades," he added.

The FTZ will create conditions to test yuan convertibility under the capital account, market-determined interest rates and international use of the Chinese currency within the FTZ. Citigroup is one of those institutions that plan to set up a branch in the zone.

Watershed moment

Gregory Chin, a professor of political economy at York University in Toronto, Canada and a former Canadian diplomat in Beijing, said the new policies in financial services for the zone mark "an important watershed moment" in Shanghai's efforts to build a greater role as a hub for onshore renminbi business as well as cross-border renminbi business.

"For a long time, especially since China entered the World Trade Organization, foreign banks and financial interests have wanted more room to operate inside the Chinese market, especially in the Shanghai area," said Chin.

"Foreign financial institutions see enormous business potential inside China, especially if they can expand into more areas of renminbi-based lending and other renminbi-denominated financial activities."

Sophii Weng, an economist with Standard Chartered Bank in New York, said the Shanghai FTZ is still in "conceptual territory", even with certain new policies in the banking sector. She said the blueprint for the banking sector lacks "details".