July 23 (Reuters) - London-based luxury department store Harrods is in talks with Shanghai's municipal government on opening its first store outside the United Kingdom, China Daily reported.

Harrods Department Store in London at Night. © Corbis

Harrods is keen to open a department store in one of the buildings where British banks and merchant houses once traded, the newspaper said, citing a real estate agent familiar with the plan of the British emporium.

Choices are seen limited to a few locations that are big enough for Harrods, which operates one of London's biggest department stores, the newspaper said.

The newspaper cited an executive from Harrods as saying no plans had been confirmed to open a Shanghai store, and it could take a long time before any lease agreement can be concluded. It gave no further details.

Marks & Spencer (MKS.L) opened its second store in Shanghai last month and is scouting for premises for its third store, the paper said.

Lifestyle International (1212.HK), Hong Kong's top department store operator by market value, is also in talks to build a multi-billion-yuan high-end department store in Shanghai in a bid to tap China's fastest-growing retail market.

(Reporting by Donny Kwok; Editing by Jacqueline Wong)