Specifics of China's pilot financial service reform were released on Friday as the first bond issuance by a loan company in Wenzhou, Zhejiang province, proved successful.

The new policies focus on bond financing for legally registered small loan companies.

Announced by the Wenzhou government, the policies are designed to govern the operation of the city's private lending registration service center, small and medium-size enterprise financing service center, and other financial facilities.

"We are planning to launch the private lending service center by introducing authorized agencies for lending registration, contract notarization and assets appraisal registration," said Zhang Zhenyu, director of the city's financial office.

In addition, he said, Wenzhou is about to introduce its index for private lending as early as late this month, to be accompanied by publicly available information updates and risk warnings.

Wenzhou, which boasts one of the densest clusters of private enterprises in China, was selected for the pilot reform after a local financial crisis featuring widespread factory closures because of dwindling orders from overseas and rising interest services charged by underground lenders.

The reform is aimed at building the city into a prosperous but well-regulated financial service center capable of meeting the needs of local entrepreneurs.

Central government officials expect the Wenzhou reform to serve as an example for similar changes that they may recommend across the nation.

"We have noticed that private lenders are totally inadequate in meeting the huge demand from our local businesses while the State-owned banks that used to offer larger loans also have difficulty coming up with the right solutions," Zhang said.

Some 30 small loan companies have already registered with the government since March, with total registered capital of more than 8 billion yuan ($1.28 billion), he said.

To supply SMEs with innovative financial products, the new regulations promise that all kinds of bonds and securities will soon be introduced to the city's financial market.

"The local private loan companies are encouraged to develop trial services to process the private placement of SME bonds, and the exchange in shares of non-listed companies," Zhang said.

The city aims to have more than 30 listed companies in 2015 and another 50 ready for the initial public offerings. It will welcome more securities companies to set up branches.

Zhang also pledged the government's encouragement of direct investment overseas by local individuals.

Zhou Dewen, chairman of the Wenzhou SME Development Association, pointed out that the new regulations contain innovations for local enterprises' direct financing and loan terms.

"There are more options for SMEs to access loans and take part in the city's development by investing in a larger variety of business areas," he said.

However, there is no major breakthrough on whether to allow the establishment of private banks and more flexible interest rates. Short of these, he said, "our financial reform still seems to have a long way to go".

Wang Jianye, chief economist at the Export-Import Bank of China, said new rules do show major progress by putting the private lending in the spotlight.

But Wang said that the reform has still not fundamentally transformed the local financial system.

Unless that is done, there will not be an effective solution to the problem of rampant underground lending, Wang said.