Translated from China Business News By Li Yang

The financial reform plan of Wenzhou in Zhejiang province has been released. It has been several months since the city, which is famous for its prosperous private economy and finance, was earmarked as a financial reform pilot zone.

Exploring the possibilities that could arise out of starting a private foreign direct investment pilot project, is one of the more noticeable initiatives proposed by the plan.

This move, if successful, will provide a legal outlet for private capital in Wenzhou to reach external markets. Wenzhou’s developed real economy needs a developed financial sector. Opening the door for private foreign direct investment is an important part of building such a financial sector that can meet the needs of real economy development.

The meaning of Wenzhou’s reform lies in the establishment of a mature financial service and supervision system. Meanwhile, private capital should have more opportunities to participate in international competition and cooperation. A vigorous economy must be based on a healthy financial sector.

According to the financial office of Wenzhou government, the overall size of private capitals in Wenzhou is more than 600 billion yuan ($95 billion), which increases by 14 percent each year. In the past, there were some irregular channels for private capital to invest abroad. The reform is to create well-regulated and supervised legal channels for this capital.

If the authority gives the green light to private investment abroad, the foreign exchange administration under private capital items will be reformed accordingly, which will help China accumulate the experience of opening capital accounts in the future.

But the authority should also figure out how to avoid the outflow of private capital by strengthening financial administration and supervision.