North Korea plans to build an "export processing zone" near the border with China, state media said Thursday, in a move that appears to be aimed at increasing trade with the neighboring ally amid economic challenges due to global sanctions.

The decision to establish the "Musan Export Processing Zone" in Musan County, North Hamgyong Province, was made during a meeting of the Standing Committee of the Supreme People's Assembly (SPA), the North's rubber-stamp parliament, according to the Korean Central News Agency.

"The sovereignty of the DPRK will be exercised in the zone," KCNA said, using the acronym of the North's official name, the Democratic People's Republic of Korea. "A relevant decree of the SPA Standing Committee was issued on April 24."

Musan County is a border town near China where one of the North's biggest iron mines is located. KCNA did not mention what items the envisioned export zone will deal with, nor did it elaborate on other details such as when the zone will be opened.

Observers said the zone might be used to process materials brought in from China and manufacture products that will be exported back to the country.

North Korea has been under multiple UN sanctions imposed on its regime in retaliation for its missile and nuclear tests. Under the sanctions, trade has been restricted and in particular the export of its labor force, a main source of foreign currency, has been banned. (Yonhap)