Financial reforms is the driving force behind the Shanghai Free Trade Zone. And successful reform in the region could pave the way for China's financial reform for the next decade.

Financial reforms is the driving force behind the Shanghai Free Trade Zone. And successful reform in the region could pave the way for China's financial reform for the next decade.

Three days from the official launch, the discussion over policy details is growing fierce, as competition between the commercial banks, ramps up.

Days before the launch of Shanghai Free Trade Zone, the area has already become one of the red sea for commercial banks, who are eagerly to grasp a large share of the rising trade star. Banks like ICBC, ABC, Bank of China and Bank of Communications have sent out operating applications to the regulators.

Analysts say, as the free trade zone forms, Chinese enterprises will benefit from a much lower trade costs.

"We used to do offshore financing in Hong Kong and Singapore, and the transaction costs are quite high at that time. Domestically, we have no such kind of area to provide similar services, which forced Chinese companies to search overseas. It's very inconvenience. The free trade zone at home could save us lot of time and money." Chen Xingdong, Md & Chief Economist of BNP Paribas China said.

The free trade zone offers domestic lenders equal treatment with foreign banks, which means more opportunities and higher revenues. Though the detailed policy has not been launched yet, analysts say, the free trade zone should abandon reserve requirement ratios and loan-to-deposit ratios.

"Financial reforms should cover regulatory sector. For example, the triple R need to be phased out, and the loan-to-deposit ration is also drag down Chinese banks. All banks should play under the same rules." Liang Ping, Chief Economist of Bank of Communications said.

Analysts say, financial reforms within the area will form a model for the nation to follow. Further, it can also pave the way for the internationalization of Renminbi.