China's central bank launched a free trade account for the country's first free trade zone (FTZ) in Shanghai on June 18, as part of efforts to test bolder financial reforms in a risk-controlled environment.

The Shanghai Head Office of the People's Bank of China (PBC) said that five banks have met the requirements to open the account. Companies registered in the FTZ—a 29-square-km area to pilot economic reforms—will be able to use the account for financing, investment and other cross-border transactions.

So far, firms in the zone can borrow offshore funds, deploy working capital between subsidiaries both in and out of China and enjoy greater flexibility in managing foreign exchanges.

The move comes two weeks after the PBC issued operating details on the free trade accounting unit, an arrangement that separates cross-border transactions in the FTZ from other onshore transactions.