China's State Council has eased restrictions in the Shanghai Free Trade Zone (FTZ) to attract badly needed foreign companies, Reuters reports.

Newly registered foreign firms are only 12 per cent of the 10,000 firms allowed to operate in the FTZ. Remove Hong Kong and Taiwan concerns and the proportion falls to six per cent.

The new changes widen rights ranging from heavy equipment makers to commodity exporters, who can now operate legally, allowing foreign motorcycle manufacturers and aircraft engine makers for the first time.

Free from joint-venture requirements, foreign-owned railway bridge and station equipment producers can now set up shop.

Ownership restrictions were also lifted on export commodity firms, including cotton, sugar, salt, and cooking oil trade firms. Foreign maritime cargo handlers will be allowed to hold 51 per cent in joint ventures.

But the 29-square kilometre FTZ on the outskirts of Shanghai has lost much of its appeal since many of its special rights are common nationwide and are no longer special.