SHANGHAI (AFP) - China has officially unveiled a plan for its first free trade zone in Shanghai, shedding light on Friday on the reform path of the new leadership as it aims to transform the world's second-largest economy.

The government will allow free yuan convertibility under the capital account on a trial basis, and test market-set interest rates and cross-border use of yuan in the zone, according to the plan issued by the State Council, China's Cabinet.

Restrictions on foreign investment will also be eased, as regulations on operations of foreign firms and Sino-foreign joint ventures will be "temporarily adjusted" in the zone for three years from Oct 1, said the plan, which is largely in line with a draft reported by AFP earlier.

"It (the zone) should be made an experimental field to push forward reforms, improve the open economy, as well as accumulate experience that can be duplicated and promoted," the Cabinet said in a statement while announcing the plan. However, it made no mention of a reported plan to liberalise the country's tightly controlled Internet sector in the zone.

Earlier this week, unnamed government sources said the zone would allow access to Facebook, Twitter and other websites banned nationwide, the South China Morning Post had reported. The official People's Daily later rebuffed the report, saying in a Friday commentary that "China will not set up a 'political concession' on the Internet".

According to the plan, China will also ease restrictions on trade, as well as 18 service sectors ranging from finance and shipping to culture services. Foreign financial institutions will be allowed to set up solely-owned banks and privately funded Sino-foreign joint ventures, while domestic lenders will able to conduct offshore business in the zone.

A proposed rule to allow foreign and Sino-foreign joint venture auction firms to sell cultural relics in the area was scrapped in the overall plan, however.

The free trade zone, which received official approval last month, will amalgamate four existing bonded trade zones in Shanghai and span 29 sq km.

Premier Li Keqiang, who took office in March, hopes the project will be one of the crowning achievements of his administration, analysts and government officials have said.