Singapore lender DBS Bank will start operating in Shanghai's free trade zone from the start of this year, after getting the green light from the Chinese authorities to do so.

DBS' China unit DBS Bank (China) said yesterday that its sub-branch in the zone had obtained approval on Tuesday from the China Banking Regulatory Commission Shanghai to commence operations.

The lender was among the first batch of financial institutions to receive a nod to set up at an outlet in Shanghai's free trade zone, which was officially launched in September last year. It was one of only two foreign banks given this approval.

DBS is now also one of the first foreign banks to receive operational approval for the Shanghai free trade zone outlet, the bank said in a press release.

Its sub-branch in the zone "is expected to start servicing customers at the beginning of the new year", DBS added.

The free trade zone is designed as a testing ground for economic reforms that China intends to eventually extend to the rest of the country. Such reforms include relaxing controls on China's currency and interest rates.