By Andrew Walker
Economics correspondent, BBC World Service
The economic downturn played a major part in the talks.
Companies from the UK and other foreign countries will be able to have their shares traded on Chinese stock markets, Beijing has said.
The position was confirmed after talks on Sino-UK economic cooperation led by Chinese vice-premier Wang Qishan and UK chancellor Alistair Darling.
If it happened, foreign companies would have access to the large and growing pool of funds from Chinese savers.
But no timetable was set out for the change in the rules.
'Bold and ambitious'
Opening up the Shanghai market to foreign companies is still an aspiration.
But the role of Vice-Premier Wang in the discussions puts a degree of political commitment behind it that will give it extra momentum.
When it happens, it could be another major step in China's growing integration into the international financial system.
Jim O'Neill of the international investment bank Goldman Sachs said it was a "very bold and ambitious step", but that the devil would be in the detail.
Foreign companies will only take the opportunity to list in China if it is easy and credible for them to do it, he added.
If it did happen, he said, services companies including construction firms and retailers, such as Walmart, might well be interested.
The bank HSBC was also an obvious candidate, he added.
The financial crisis loomed large in the discussions between UK and Chinese officials, with Britain deep in recession and China experiencing a sharp slowdown in its economic growth.
The global downturn has if anything reinforced China's rising economic profile as a key player that needs to be involved in tackling international problems, something Mr Darling implicitly acknowledged after the meeting.
Given it was expected to continue growing, Mr Darling said China's role "as a motor of global recovery" was "absolutely vital", comments which reflects China's importance in terms of the trade in goods and services.
Allowing foreign companies to list their shares on its stock exchange would underpin its rising status in global finance too.
It would also be an important step towards the Chinese authorities' ambition to make Shanghai a major global financial centre.