HONG KONG (Reuters) - China has allowed foreign investors to fully own e-commerce companies in Shanghai's free trade zone as part of a pilot scheme, the official Xinhua news agency said on Wednesday, citing the Ministry of Industry and Information Technology.

Foreign investors previously required a Chinese joint-venture partner to operate an e-commerce firm in the highly competitive market. The pilot scheme could provide an easier route for overseas companies to enter the ring and fight for a slice of one of the world's biggest e-commerce markets.

Telecommunications authorities in Shanghai will regulate the scheme and the foreign investors, according to a Ministry of Industry and Information Technology (MIIT) statement reported by Xinhua.

Since the launch of the free trade zone (FTZ) in September 2013, policy makers have trumpeted reforms and relaxed regulations to boost China's e-commerce industry, dominated by Alibaba Group.

But foreign e-commerce firms have struggled in China against the likes of Alibaba and No.2 JD.com Inc. Amazon.com Inc only holds a sliver of the market, while eBay Inc pulled out of the country in 2006 after a long and bitter battle with Alibaba.

In August, Amazon said it would set up shop in the Shanghai free trade zone, hoping to benefit from less stringent trade regulations to sell a wider range of products in the country.

Going in the opposite direction, Alibaba has been making forays into the United States, as it looks to link up American retailers and merchants with Chinese consumers.

At the same time, it has made moves to assure regulators of its good intentions. Alibaba agreed to prevent the sale of 15 illegal or dangerous toys in the United States, the country's Consumer Product Safety Commission said on Tuesday.