The newly established free trade zone in Shanghai is aimed at piloting economic upgrading with a focus on further opening up the services sector, which will in turn boost reforms, Long Guoqiang, director-general of the General Office of the Development Research Center of the State Council, told a news briefing on Wednesday.

He added that China is losing the traditional advantage of low cost but is establishing new advantages in industrial activities with more added value.

Meanwhile, the country's services sector is less developed and reforms will be piloted in the zone on sector management to enhance international competitiveness. The zone will also help to boost regional economic integration, Long said.

The zone will not negatively impact Hong Kong, Long said, because the financial hub of Shanghai mainly serves the domestic market while Hong Kong is an international financial center.