There is a possibility that Chinese investment will be allowed by Taiwan in its flat panel and microchip sector, in spite of the recent rows with the mainland.

According to an interview published in the Taipei-based Commercial Times, Shih Yen-hsiang informed that his ministry might ease limits on Chinese investment here.

He told the paper: "Chinese investors may be allowed to buy stakes of local flat panel and microchip makers. The recommendations are under consideration."

On Tuesday, Shih specified that before the end of 2009, Taiwan might modify long-standing controls on local companies' investments in China.

He said, while replying to queries raised at parliament, "The discussions will not take a long time. We expect there will be a conclusion before the year's end."

Since President Ma Ying-jeou came to power last year, tensions with China have decreased, as he vowed to encourage settlement and trade links.

However, the growing relationship has been tensed by the Dalai Lama's visit to Taiwan, reviled in China as a separatist, and the screening on the island of a film on Uighur leader Rebiya Kadeer, branded a "criminal" by Beijing.

The fundamental economic interdependence is getting stronger by the year, in spite of the politically tense incidents that have been created.

"Local businesses are among the biggest foreign players on the mainland, with at least 80 billion dollars invested there, but Taipei has imposed limits on investment in high-tech firms fearing it could give China a technological advantage," said a source.