Anticipation of the gains from economic reform in the Chinese pilot Free Trade Zone is running high. But the pace of financial liberalisation in the pilot zone, launched two months ago in Shanghai, will be gradual, industry observers are saying ahead of the release of detailed deregulation measures."There's much talk about the short-term effect, hoping the zone will bring a windfall of money tomorrow. I don't believe [this will be] so. This is actually a structural experiment for China to find the proper [and] a less interventionist approach to grow the economy," said Charles Li, chief executive of ANZ China in Beijing.Nevertheless, Li is positive about the liberalisation efforts in the zone, which, if successful, could boost banking activity in trade finance, foreign exchange and in interest rate swaps.ANZ China is the ninth foreign bank to open a sub-branch in the zone, after Citigroup, SDB China, HSBC, The Bank of East Asia, Hang Seng Bank, Nanyang Commercial Bank, Deutsche Bank and Standard Chartered, as well as 20 domestic institutions.ANZ plans to begin the operation of its sub-branch in six months.So far, more than 1500 businesses have registered to enter the zone, more than 200 of which have opened shops there, according to Chinese media reports.The zone, the first Hong Kong-like free trade area in China, currently spans 28.8 square kilometres in Shanghai's Pudong New Area, which includes the Waigaoqiao duty-free zone and Yangshan port, and may eventually grow 40-fold in size.  Chinese authorities have declared that the purpose of the zone is to create a free market environment through the removal of capital flow restrictions, the liberalisation of interest and exchange rates, and full convertibility of Renminbi (RMB). It will be a model to be replicated elsewhere in China.As free capital flows between the zone and international markets are assured, the next focal point to watch will be "how free the flows will be between the zone and the China proper… that could make quite an impact," said Li.With an airport nearby, trade-related businesses - either commodity or service trade - are likely to gather in the new FTZ, as opposed to the Special Economic Zone in Shenzhen, where the manufacturing sector is concentrated, Li believes. "It will be a location where companies may want to do more trade activities, especially more commodity-based trade. That's one area we're doing our preparations on," said Li.Already the zone claims that luxury goods, such as luggage and cosmetic product imports purchased via its e-commerce platform, which was launched on November 18, will be 30 per cent cheaper, as the tariff averages 10 per cent and a 17 per cent value-added tax will be waived.Competition between foreign banks and their mainland Chinese peers in the zone will be limited in the early stages, as they serve different client bases with different business models, said Kenny Shi, financial services partner for the central region, of KPMG China.Mainland Chinese banks are more likely to help their local customers to invest or trade abroad; while foreign banks