Taiwan is set to ease restrictions on local banks investing in China in a bid to boost their competitiveness on the mainland, the government said Friday.

The cabinet amended a law on cross-strait banking this week to remove a rule barring local banks and financial holding companies from investing in more than one Chinese financial institution, said the Financial Supervisory Commission.

Taiwanese banks will also be able to open up both branches and subsidiaries in addition to acquiring stakes in their Chinese counterparts, it said in a statement.

Their offshore banking units will also be allowed to expand lending business to Chinese individuals or institutions, instead of only serving Taiwanese or foreign businesses, it said.

The new rules are expected to take effect within one month.

Taiwan and its giant neighbour in 2009 signed a package of agreements on better cooperation in banking, insurance and securities, which went into effect in January last year.

Currently six Taiwanese banks have set up branches in China while four others have opened up liaison offices there.

China still considers Taiwan part of its territory, even though the island has governed itself since 1949 at the end of a civil war.

Ties have improved markedly since Ma Ying-jeou became Taiwan's president in 2008 on a China-friendly platform.

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