China is to let private and foreign investors buy controlling stakes in domestically listed firms for the first time.

The change in policy could provide great opportunities for foreign firms wanting access to the Chinese market.

A green light has been given to the takeover of state-owned Shenzhen Development Bank by American investment company, Newbridge Capital.

This groundbreaking deal is the first that allows a foreign company to buy a controlling stake in a Chinese bank on the mainland.

Laying the foundations

There are about 1,200 listed companies in China, none of them are majority foreign-owned and many are state-owned firms with only a minority stake floated.

Chairman of the China Securities Regulatory Commission, Zhou Xiachuan, outlined the reasons for the change to state media.

"The purchase of listed companies by non-state-owned and foreign-funded enterprises will further enhance the quality of the companies and lay the foundation for a sustained and healthy development of the securities market," he said.

The new rules, which come into effect at the start of December, do not specify the type of investor they cover, but Zhou Xiachuan said they apply to all investors, including foreigners.

After an investor takes a controlling stake in a listed firm, transferring control of the company will be banned for a twelve month period, under the rules.

Prototype?

Howard Gorges from the South China brokerage company told the BBC's World Business Report the success of the Newbridge deal could be crucial.

"The fact that Newbridge's deal is with a bank in Shenzhen, which is next door to Hong Kong and is a special economic zone, suggests that this may be a prototype," he said.

"If this one seems to be working then they'll open up the system more, and things could move faster in the way of reform after the new leadership changes are made at the end of this year."