"In the coming year, we will continue to adhere to the principle of developing cross-strait relations and promoting peaceful reunification of the motherland," Wen said at the start of the annual full session of parliament.

"We are... ready to hold talks on cross-strait political and military issues and create conditions for ending the state of hostility and concluding a peace agreement."

China usually refers to relations with Taiwan as "cross-strait", referring to the narrow Taiwan Strait separating the island and the mainland.

China and Taiwan have been governed separately since the end of a civil war in 1949 but Beijing considers the island part of its territory, insisting that reunification is only a question of time.

Their relationship has long been considered one of Asia's potential war flashpoints and both sides have engaged in an expensive military build-up.

China has targeted Taiwan with more than 1,000 short-range ballistic and cruise missiles, according to defence authorities on the island.

Taiwan's presidential spokesman Wang Yu-chi welcomed Wen's comments, but said Taipei was not immediately ready to discuss political and military issues with Beijing.

"In the current stage we want to focus on economic and trade issues," Wang said.

"We can move on to political and military issues after we reach certain consensus on the economy and trade first."

From 2000 to 2008, cross-strait relations were particularly bad, as Beijing watched the island's independence-minded president Chen Shui-bian push for greater autonomy.

However, relations have improved markedly since the more China-friendly Ma Ying-jeou became president of Taiwan in May last year, highlighted by the introduction of direct regular flights between the two sides.

Wen's call for military talks extended an invitation originally made by President Hu Jintao at the end of last year.

Wen also referred to Taiwan's long ambition to participate in international organisations such as the United Nations, although he insisted the baseline criteria remained.

"We are ready to make fair and reasonable arrangements through consultation on the issue of Taiwan's participation in the activities of international organisations," Wen said.

But he said such participation would have to come under the "one-China principle", which maintains that Beijing is the sole legitimate government of all of China, including Taiwan.

Wen also said China would work to improve already lucrative economic ties between the two sides, with the aim of jointly overcoming the global economic crisis.

"We will accelerate normalisation of cross-strait economic relations and facilitate the signing of a comprehensive agreement on economic cooperation," Wen said.

Trade between China and Taiwan had risen steadily in recent years but plunged by more than 55 percent in January to 5.03 billion dollars due to the economic crisis, according to figures published in the state-run Chinese media.

China's imports from Taiwan in January were valued at 3.9 billion dollars, down 58 percent from a year ago, the reports said.

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