The proposal would see mainlanders exempted from having to prove the origin of their capital and allowed to borrow up to 50 per cent of the property's value from Taiwanese bank for investments in commercial real estate such as leisure and tourism facilities. They would also be allowed to stay on the island for up to 90 days per visit, up from 10 days.

The source said other policies to be relaxed included expanding the 'mini links' in Quemoy and Matsu, two Taiwanese-controlled islands close the mainland, and pardoning businessmen who broke the Taiwanese government's ban on investing on the mainland and encouraging them to invest in Taiwan.

Government spokesman Shieh Jhy-wey confirmed yesterday that the cabinet's policy co-ordination committee had been discussing ways to provide incentives to attract mainland-based Taiwanese businessmen to return to and invest in Taiwan.

Frank Hsieh Chang-ting, the ruling Democratic Progressive Party's presidential candidate, confirmed the government was planning to further ease cross-strait economic policies and sought to take credit for the move, saying it was the 'result of repeated communications' between his camp and the government.

Mr Hsieh, who has called for improved cross-strait relations, had asked the government to pardon businessmen who had invested illegally on the mainland and allow mainland investors to invest in the commercial property market.

Fellow presidential hopeful Ma Ying-jeou of the mainland-conciliatory Kuomintang said the moves should have been made long ago.

KMT colleagues called the plan a gimmick. 'Why couldn't the Chen Shui-bian government do it in the past eight years? Why can it suddenly do it during election time. Obviously, it is trying to garner support from voters,' KMT legislative caucus leader Kuo Su-chun said.

But some Taiwanese businessmen welcomed the plans, saying that regardless of the timing, they would still be beneficial.

Economists and academics also said the proposed measures were positive. 'This actually is something the Chen government can do ahead of the election,' KGI Securities economist Wenyen Fang said. She said the mainland investment would help invigorate the property market.

What is planned:

Allowing mainlanders to invest in commercial property in Taiwan

Expanding the scope of the 'mini links' to allow Taiwanese businessmen based in other mainland provinces in addition to Fujian to travel to and from the mainland via Quemoy and Matsu

Pardoning Taiwanese businessmen's illegal investments on the mainland in order to encourage them to invest in Taiwan

Allowing Taiwanese banks new branches on the mainland

What has been approved:

NT$10 million to help mainland-based Taiwanese businessmen relocate to Taiwan