The Australian government and Guangdong province on Thursday signed an agreement to set up an Australia-Guangdong Business Co-operation Council to expand ties between the two sides.

The signing ceremony in Guangzhou was witnessed by Guangdong Party chief Hu Chunhua and Australian Minister for Trade and Competitiveness Craig Emerson.

"Southern China is a center of Australian small and medium-sized business activity and the new council will help to deepen long-standing economic co-operation and commercial ties between Australia and Guangdong," Emerson said.

The council will be composed of about 10 Australian companies with business interests in Guangdong, and a similar number of Guangdong firms with substantial business interests in Australia, Emerson said. Its inaugural meeting will be held later this year.

"It is firmly in Australia's interests to seek closer co-operation with Guangdong, which is one of the most populous, economically driven and wealthy provinces in China," Emerson said.

"Guangdong's 900 billion Australian dollar ($945 billion) economy places it amongst the top 20 economies in the world," he added. Hu said Guangdong expects to further economic co-operation with Australia in coming years.

Emerson's visit to Guangdong comes after he traveled with Australian Prime Minister Julia Gillard to the Boao Forum for Asia in Hainan province and also to Shanghai and Beijing.

In Shanghai, Emerson accompanied Gillard for talks on closer engagement with China in the banking and finance sector.

He also met the new Chinese leadership to discuss opportunities to strengthen trade and investment between Australia and China, including in the agricultural and service sectors.