Officials at the policy-making Mainland Affairs Council (MAC) said the new measures will take effect in late June at the latest.

Minister Yiin said the government is adopting a gradual approach in opening the country to Chinese investment, with initially strict restrictions and an incremental expansion of the permitted fields for investment.

In the initial stage, the liberalization will include 63 industries in the manufacturing sector covering traditional Chinese herbal medicines, automobiles, textiles, and plastic and rubber processing products.

Investments in industries like silicon wafers and TFT-LCD flat panels will still be prohibited for now.

There will be 24 business lines in the services sector, including wholesale, retailing, tourism and transport services.

In addition, 11 operations in the infrastructure sector will be opened to Chinese investments. But contract business will be excluded to protect local construction contractors, Yiin said.

The regulations will also include a provision that bans any monopoly or oligopoly investment and firms that have stakes owned by Chinese military units, he went on.

If a Chinese investor or company acquires a more than 10 percent stake in a local business, it will be regarded as direct investment in Taiwan and subject to strict monitoring and supervision, according to Yiin.

A full list of permitted lines and industries of Chinese investment are set to be released later this month.

Yiin said more investment fields will be opened to Chinese concerns in future stages.

Meanwhile, an inter-ministerial meeting coordinated by the Council for Economic Planning and Development (CEPD) finalized the criteria for indirect investments by overseas-registered Chinese businesses.

According to the rules, Chinese investors having a 30 or more percent stake will be subject to the same restrictions as any other Chinese businesses after Taiwan formally opens to Chinese investment.

But overseas firms with Chinese investment having "substantive influence" on corporate business operations will come under same scrutiny even if the Chinese stakes do not exceed the 30 percent limit.

The criteria is aimed at preventing Chinese investors from using the guise of overseas-registered businesses to bypass the investment restrictions directly from China.

CEPD officials explained that the provision is necessary because in some cases, a shareholder holding less than 30 percent of stock can appoint the chairman and president of a company and thus can have substantive control of the business.

MAC officials said the new measures should be able to take effect no later than the end of June after the whole set of measures are approved by the Cabinet.

Business and industry leaders welcomed the investment-liberalization measures worked out by the government. They expect the move will help bolster cooperation between enterprises across the Taiwan Strait and beef up their international competitiveness.

Opening up Taiwan to Chinese investment was one of the major policies pushed by the new government led by President Ma Ying-jeou.

Understandings and guidelines were reached April 26 in Nanjing between the chief negotiators representing the respective sides -- Chairman Chiang Pin-kung of the Taipei based Straits Exchange Foundation and President Chen Yunlin of the Beijing-based Association for Relations Across the Taiwan Straits.

The measure is expected to reverse the present one-way movement of investment from Taiwan to China and help normalize cross-strait trade and economic ties.