The city would be chosen if the mainland proceeds with the plan, Tung said, while revealing other free-trade measures being rolled out to help Hong Kong's economic recovery and restructuring.

The mainland will consider allowing Hong Kong banks to conduct Renminbi business for individuals on a trial basis, including deposits, remittances, exchange and credit card business, Tung said.

Allowing local banks to conduct Renminbi business for individuals would benefit Hong Kong in its development as an international financial centre, said Joseph Yam, chief executive of the Hong Kong Monetary Authority.

Under a World Trade Organization agreement, China will only allow foreign banks to run Renminbi business with Chinese individuals in late 2006.

Tung also said that the central government has agreed to support mainland enterprises that meet requirements to make public offers of securities and to get listed in Hong Kong.

The mainland authorities will also consider relaxing the 15 percent limit on Hong Kong insurers in holding shares in a mainland insurance company, Tung said.

On the tourism front, residents in Beijing and Shanghai will be allowed to travel to Hong Kong without having to join tour groups, he said.

Hong Kong and the mainland had also agreed to reach a consensus by the end of September on the rules of origin for Hong Kong products, 273 of which will be exempted from tariffs when exported to the mainland starting next year.

The new agreements represent an extension of a free-trade pact, called Closer Economic Partnership Agreement (CEPA), signed between Hong Kong and the mainland on June 29.

The pact, signed during Premier Wen Jiabao's visit to Hong Kong, extends zero tariff treatment for 273 Hong Kong products starting next year and all local goods from 2006.

It further opens up 17 of the mainland's service sectors to Hong Kong firms.

Calling the measures "major breakthroughs,'' Tung said "the government will do its best to help all sectors and professionals in Hong Kong to grasp these opportunities so as to speed up economic recovery.''

The new agreement came after Premier Wen's pledge that the central government would support the measures to help Hong Kong's economic recovery and restructuring.

Wen agreed during the meeting to further expand market access of telecommunications, tourism and financial services to Hong Kong firms.

Hong Kong's tourism-related sectors, such as retail, catering, hotel and entertainment, are expected to benefit from the relaxed visa requirements for residents in Beijing and Shanghai, analysts said.

The new measure came after residents in the cities of Jiangmen, Foshan, Zhongshan and Dongguan in South China's Guangdong Province were allowed earlier this month to travel to Hong Kong individually starting next Monday.