The island of Hengqin in south China's Guangdong Province started a new customs operation on Friday that allows most goods to be moved there tax-free from the neighboring Macao Special Administrative Region (SAR).

The new operation became effective at midnight in the Guangdong-Macao In-depth Cooperation Zone in Hengqin, in the city of Zhuhai. The 106-square-kilometer island sits between Macao and the Chinese mainland.

Under the new mechanism, tariffs will be generally lifted for goods entering Hengqin from Macao, while goods moving from Hengqin to the Chinese mainland will now be subject to import duties, if they are not eligible for added-value tax exemption.

Similar tax exemptions also apply to luggage and parcels entering Hengqin from Macao.

The new policy is seen as a major arrangement to enrich the practice of "one country, two systems" in Macao and boost the SAR's economic diversification.

"The new policy will effectively facilitate the flow of goods, personnel, capital and information between Hengqin and Macao, and create valuable new space for Macao's new industries and business forms," said Li Weinong, director of the zone's executive committee.

In 2021, China's central authorities decided to build the Guangdong-Macao In-depth Cooperation Zone in Hengqin and make the island an important new growth point for Macao's economy.

By the end of 2023, there were 11,500 Macao residents working or living in Hengqin, an annual increase of over 70 percent, according to the zone's statistics bureau.