Taiwan, which China sees as its own territory, has been implementing a series of measures to improve trade relations with the booming mainland under the island’s new President Ma Ying-jeou.

Despite political friction, China is the favorite investment destination of Taiwan firms, thanks to a common culture, lower manufacturing costs and a potentially huge consumer market.

“With regard to restrictions on cross-strait investment, we will loosen things one step at a time, over the next half year,” Yiin told reporters on the sidelines of a business event.

Yiin added the new rules would be implemented in three broad steps.

In the first of those, the government would raise the limit that currently says no Taiwan company may put more than 40 percent of its net assets in China. Yiin said a plan on that front should be ready for government approval by the end of July.

In the second phase, the government will lift some restrictions that prevent companies in certain sectors, such as high-end semiconductors and liquid crystal displays (LCDs), from investing in China.

And in the third, the government will allow mainland Chinese companies to begin investing in Taiwan, Yiin said, without elaborating.

Between 1991 to 2007, Taiwan approved investments of US$65 billion to China, official data showed, but analysts say the actual figure could be much higher at over US$100 billion, due to Taiwan capital that is routed indirectly to China through third-party locations such as Hong Kong. Along similar lines, the Taiwan cabinet late last month also approved a raft of reforms allowing greater investment by the island’s financial firms in China, further opening the fast-growing mainland market to its brokerages, asset managers and others.

Previously, Taiwanese companies have complained that the restrictions have made them less competitive compared to their Asian counterparts.

China has claimed sovereignty over self-ruled Taiwan since 1949 and vowed to bring Taiwan under its rule, by force if necessary.

But ties between Beijing and the have warmed since the landslide election victory of President Ma, whom analysts say Beijing looks upon more favorably than his predecessor.

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