Chinese Premier Wen Jiabao 5 March announced readiness to open talks with Taiwan to “create conditions for ending the state of hostility”. China 14 March agreed in principle to allow Taiwan to take part in World Health Assembly as observer. Taiwan’s Mainland Affairs Council 14 March urged China to scrap 2005 anti-secession law authorising use of force on Taiwan, saying it was irrelevant following improved relations.

Taipei mayor invited Shanghai mayor to “twin- city forum” in May to discuss increased cooperation between 2 cities. Directors of China and Taiwan’s Palace Museums met 15 Feb to discuss staff exchanges; no agreements concerning name issue, exchange of collections but further discussions expected.

Former President Chen Shui-bian, on trial for corruption charges, admitted having pursued explicit independence policy throughout his 8 years in office.

In further sign of increased cross-Strait cooperation, top negotiating officials at 20-21 Dec summit signed economic agreements promising $19m in Chinese aid for Taiwan companies operating on mainland, support for greater links between banks across Strait by allowing Taiwan banks upgrade representative offices on mainland to full branches. After 31 Dec comments by Hu Jintao noting China ready to support Taiwan’s membership of international organizations, reports 2 Jan that Beijing will allow Taiwan to join World Health Assembly under name “Chinese Taipei”. 15 Dec first regular daily nonstop flights began between mainland and Taiwan.

China, Taiwan 4 Nov signed new series of cross-strait agreements, including increase in flights, shipping and food-safety cooperation. Visit by Beijing delegation led by Chen Yunlin was most high-level visit by Chinese Communist Party official to Taiwan since 1949 split. Chinese premier Hu Jintao met with Lien Chan, former Taiwan premier and honorary KMT party chair, in margins of APEC summit 22 Nov; highest level cross-Strait meeting since 1949.

U.S. 3 Oct announced it would proceed with long-delayed $6b arms sale -- half the original proposed amount and excludes technologies Taiwan does not already possess. Beijing protested decision and said 7 Oct would forego some cross-strait high-level visits and military-to- military cooperation. Taiwan President Ma vowed 21 Oct no cross-strait war in coming 4 years. Taipei sharply condemned 21 Oct attack on senior Chinese envoy visiting Taiwan.

During late Aug commemoration of 1958 PLA bombardments of Kinmen, President Ma Ying-jeou renewed pledges to promote peace with China. Earlier, Taipei carefully announced plans to request “participation” in UN agencies. Former President Chen Shui-bian and wife Wu Shu-chen quit DPP 15 Aug after party announced investigation into their abuse of campaign funds.

Regular direct cross-strait charter flights began 4 July. U.S. Pacific Command head Adm Keating 17 July said U.S. arms sales to Taiwan frozen as part of “administration policy” amid warming cross-strait ties. 5 former ministers who served under former president Chen Shui-bian indicted on corruption charges 15 July for misuse of expense accounts, in ongoing corruption scandal surrounding Chen.

Further improvement in cross-Strait relations with agreements reached at first bilateral talks in over decade in Beijing 11-14 June. Mainland President Hu Jintao and chief Taiwan negotiator Chiang Pin-kun agreed resumption of regular charter flights, establishment of visa offices on each others’ territories. Taiwan 26 June called for “concrete” Chinese goodwill over island joining international organisations; President Hu late May said might reconsider opposition to WHO membership.

Taiwan accepted 29 May China invitation to restart bilateral talks, first in over decade, in Beijing 11-14 June on possible resumption of transport links. Signs of warming relations: President Ma called for “new chapter of peace” during 20 May inauguration, historic meeting between Kuomintang (Nationalist Party) Chairman Wu Poh-hsiung and China President Hu Jintao 28 May. FM Huang, Vice Defense Minister Cheng-heng, Vice Premier I-jen resigned 6 May over disappearance of $30m intended for Papua New Guinea in exchange for switching diplomatic allegiance from Beijing.