A free trade zone planned in Guangdong Province will play a key role in building closer ties between Macao, Hong Kong and Mainland China, China’s state-run news agency Xinhua reported.

Citing Guangdong officials, the agency said: “The Guangdong free trade zone will be positioned as deepening cooperation with Hong Kong and Macao while innovate the Mainland’s cooperation mechanism with Hong Kong and Macao.”

Under the umbrella of the Closer Economic Partnership Arrangement (CEPA) – a trade deal the Mainland has enacted with Hong Kong and Macao in stages since 2003 – the new free trade zone in the southern province will further open economic links with Hong Kong and Macao and “eliminate any policy barriers”, Xinhua reported on Tuesday.

China’s State Council in December gave approval for Guangdong to set up a free trade zone. Shanghai established the nation’s first such zone in September 2013. Free trade zones are considered a testing ground for economic reform in China and a way to boost foreign investment and the role of the country’s currency, the yuan in global transactions.

The Guangdong zone will cover 116 square kilometres, including the Nansha New Area, Qianhai and Shekou in Shenzhen and the Hengqin Island next to Macao.