FTZ inspection mechanism on the drawing board

So far, no company has filed a declaration for safety inspection on its own initiative, he said.

Since China published its Antitrust Law in 2008, the Ministry of Commerce has initiated some 700 antitrust probes into mergers and acquisitions cases, of which more than half involved at least one foreign party, Yang said.

Most of the cases eventually received a green light, with about 20 passing with additional conditions, according to Ren Li, another antitrust lawyer with Yang's firm. The only one that was rejected was Coca-Cola Co's failed bid to take over China Huiyuan Juice Group Ltd in 2009.

Though lacking official data, Ren said no more than 10 probes into foreign investment that arose out of safety concerns were initiated since the joint conference was set up in 2011.

"In general, China adopts a very tolerant attitude toward foreign investors," he said.

"A vast country like China must take into consideration national safety issues when advancing free trade zone reform," said Yu Shicheng, a professor with Shanghai Maritime University, adding, "it is the same in the United States".

But for such an inspection mechanism to be put into operation, the 28.78-square-kilometer FTZ may have to be expanded; otherwise, opportunities for M&A deals could be limited.

Local newspaper Xinmin Evening News has reported that the FTZ management committee will move to the Lingang area of southeast Shanghai, which has been mentioned as a top choice for the expansion of the FTZ.

So far, however, the enthusiasm of foreign investors seems to be overshadowed by that of their domestic counterparts due to a lack of operational rules and speculative behaviors that have pushed up office rents.

Chen Jianan, a professor of economics at Fudan University, has suggested that the FTZ should expel the speculative businesses without actual operations in order to make room for manufacturers.