Carrasco, who quit Atletico Madrid for the Chinese Super League outfit in 2018, has been heavily linked with a move to the Emirates Stadium amid Unai Emery’s search for a winger.
Arsenal bosses are now attempting to strike a transfer agreement with Carrasco’s club to bring him back to Europe, according to Italian journalist Nicolo Schira.
“Arsenal is defining for Carrasco from Dalian Yifang,” Schira wrote on Twitter.
“Contacts ongoing with Chinese club to finalise the last details of the deal.
“The Belgian player has already an agreement with Gunners.”
Carrasco was on Arsenal’s radar in January before Emery swooped for Denis Suarez on loan from Barcelona instead.
The Belgium international finally appears to be joining the Gunners after admitting he wants to return to Europe.
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“Negotiations are going well,” he said.
“I am aware that I am an important player for the team but I hope they let me leave.
“From a personal and family point of view, I would like to return to Europe.”
Arsenal have a limited transfer budget after missing out of Champions League football.
Emery reportedly has as little as £40m to play with during the summer window.
Bournemouth winger Ryan Fraser has also been linked but the Cherries want at least £30m.
Carrasco could eat up a large chunk of Arsenal’s budget if a deal is agreed with Dalian Yifang.
The 25-year-old has scored 14 goals in 36 appearances since joining the Chinese Super League club from Atletico Madrid.