TAIPEI - Taiwan on Tuesday partially lifted its decades-old ban on investment in the island by Chinese companies or individuals in a further sign of closer economic ties between the former bitter rivals.

The move was immediately welcomed by ruling-party legislators and advocates of warmer relations with China at a time when Taiwan's economy has been struggling badly amid the global financial crisis.

Under the new investment measures effective immediately, Chinese investors will be permitted to buy into 100 categories in the island's manufacturing, service and infrastructure sectors.

"Previously, the government only allowed local businesses to invest in mainland China," vice economic minister John Deng told reporters "We have hoped to do something to change this" unilateral investment.

Taiwan businesses have funnelled 77 billion US dollars to the mainland in various investment projects since the government lifted a ban on China-bound indirect investment in 1991, government figures show.

The island reported a record economic contraction of 10.24 percent in the first quarter of this year, after an 8.61 percent dive in the previous three months on dwindling overseas demand.

However, the leading pro-independence opposition Democratic Progressive Party (DPP) criticised the move, which it said was announced "in haste".

"As a matter of fact, what Taiwan needs at the moment is not money. Opening to Chinese investors could result in more competition rather than help lift the economy," DPP spokesman Cheng Wen-tsang said.

The Chinese military or affiliated enterprises will be barred from investing here due to national security considerations. The investment measures are also applicable to any individuals and companies outside China which are more than 30-percent owned by Chinese investors.

China still regards Taiwan as part of its territory awaiting reunification although the island has governed itself since 1949 at the end of a civil war.

However, cross-Strait ties have improved dramatically since the Beijing-friendly President Ma Ying-jeou came to power last year pledging to boost trade and tourism with China.

The move came more than two months after Taipei and Beijing agreed in a third round of talks to expand air links and other measures to help both sides fight the global economic meltdown and ease ties.