The month-old China (Shanghai) Pilot Free Trade Zone will propel domestic reforms, while restrictions on foreign investment in the FTZ will be shortened, a senior government adviser said on Wednesday.

The government will be "prudent" in introducing policies in the zone, said Long Guoqiang, director-general of the General Office of the Development Research Center of the State Council.

Long said that the approval of new zones elsewhere in the nation "will not be related to the progress" of the Shanghai FTZ.

"The Shanghai FTZ will be the pilot and explorer of China's economic upgrading," Long said. "In addition to liberalization of trade and tariffs, a very important part of the pilot is the opening of the service sector.

"Government functions will also be transformed to gain experience (for new free trade zones). We hope the opening of the service sector will push forward reforms at home," Long said.

The official launch of the FTZ on Sept 29 has been hailed as a major reform initiative of the nation's new leadership.

Long added that the pilot zone is taking off amid a changing domestic and global economic landscape.

The world's second-largest economy is losing its low-cost manufacturing advantage and attempting to establish a new advantage in higher value-added activities.

The nation's service sector lags behind those in other countries, he said. Meanwhile, regional economic integration among developed economies is establishing new parameters for global trade and investment and posing challenges for China.

"The pilot zone perfectly melds the central government's intention of further opening up with local governments' drive to accelerate economic growth. Investors are optimistic about China's future and the pilot zone," Long said.

As of Tuesday, 21 foreign enterprises had been established in the zone, with a total investment of $525 million.

Domestic investors had set up 213 businesses with total registered capital of $2.75 billion yuan ($450 million).

Among the new enterprises, 60 percent are in the trade sector while 33 percent are in the service sector, according to the Shanghai government.