Beijing has decided to provide special loans to small- and medium-sized Taiwan-funded enterprises on the mainland in a financial programme to woo businesses from the island.

Chen Yunlin, minister of the Taiwan Affairs Office of the State Council, made the remark on Friday during a meeting with a delegation of Taiwan's opposition Kuomintang (KMT).

"We will encourage commercial banks to offer special credits" to agricultural firms as well as small- and medium-sized enterprises (SMEs) funded by Taiwan investors on the mainland, Chen said.

The mainland government has always paid great attention to the financial needs of Taiwan enterprises on the mainland, he added.

Sources said the Taiwan Affairs Office is due to sign an agreement with the Beijing-based Huaxia Bank on Monday to help ease the financial shortage of some Taiwan SMEs.

The programme consists of a special credit fund and preferential loan policies for these firms.

The latest economic sweetener came after the China Development Bank, one of the mainland's three policy banks, offered 30 billion yuan (US$3.75 billion) in loans to Taiwan investors last September.

Chen said the mainland would further enhance exchanges and communication with the KMT to strengthen cross-Straits economic links.

"We will make concrete efforts to safeguard the interests of Taiwan compatriots and promote their businesses on the mainland," he told the KMT delegation.

Delegation head Tseng Yung-chuan, director of the KMT's "central policy committee," welcomed the mainland move.

The financial support will help these firms "upgrade their production and sharpen their competitive edge," he told reporters at a later press conference.

Despite political tensions, cross-Straits economic ties have grown stronger over the past two decades.

By the end of 2005, Taiwan investors had funded 68,095 projects on the mainland, with contract investment of US$89.69 billion. Trade volume between the two sides reached US$91.23 billion last year, with the mainland being Taiwan's biggest export market and largest source of trade surplus.

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