Taiwan's president and main opposition leader on Thursday agreed in their first meeting for five years to relax restrictions on business ties with China and to co-operate to improve relations with the mainland.

The deal between President Chen Shui-bian and James Soong, chairman of the opposition People First party, is a step towards ending a political impasse that has marred Mr Chen's minority government. It also raises hopes that the island will steer a more pragmatic course in cross-strait policy.