China and Taiwan agree on flights

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Apart from special holidays, there have been no regular direct flights since 1949, when the defeated Nationalists fled to the island amid civil war with the Communists.

China has claimed sovereignty over self-ruled and democratic Taiwan ever since and has pledged to bring the island under its control, by force if necessary.

But the election of Taiwan President Ma Ying-jeou, who won by a landslide in March on pledges to boost the local economy by improving trade with China, has suddenly warmed relations.

"This is good for Ma Ying-jeou because he wants to deliver in his first 100 days," said Joseph Cheng, political science professor at City University of Hong Kong.

"Beijing is eager to win the hearts of the Taiwan people."

Goldman Sachs forecast Taiwan GDP growth to slow to 4.5 percent this year from 5.7 percent in 2007, but to rise to 4.8 percent next year "as the economic impact from the progress on cross-Strait policies comes to fruition".

The Taiwan dollar rebounded against the U.S. currency on Friday. Taiwan stocks were up just 0.45 percent.

Chinese shares in Xiamen International Airport, which is located in Fujian province across from Taiwan and could benefit from air links, jumped 5.32 percent on Friday morning in a weak overall market.

The first flights, limited for now to weekend charters, will start on July 4 and Taiwan media said the first Chinese tour groups to Taiwan would start arriving from July 18, two key election pledges of China-friendly Ma.

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