According to the South China Morning Post, authorities are planning to allow bids from foreign telecoms firms for licences to provide the internet services in the zone.
Facebook and Twitter were blocked by Beijing in mid-2009 after riots in the western province of Xinjiang. Authorities believe that the riots were helped along by social networking sites and masterminded by people who liked funny pictures of cats.
The New York Times was blocked when it published a story about how the family of then-Premier Wen Jiabao had amassed a pile of cash.
The Shanghai FTZ is a test bed for convertibility of China's yuan currency and further liberalisation of interest rates. It is supposed to be part of the country’s reforms of foreign direct investment and taxation
The zone will be formally launched on 29 September. The idea is that unblocking the websites will make foreigners "feel like at home".
If people can't get onto Facebook or read the New York Times, they may naturally wonder how special the free-trade zone is compared with the rest of China, the China Morning Post wrote.
China Mobile, China Unicom and China Telecom have been informed of the decision to allow foreign competition in the FTZ. They did not dare complain because they knew the Chinese leadership, including Premier Li Keqiang, had backed the decision.