Taiwan's government is set to allow its insurers to invest in Chinese financial instruments for the first time, a sign of how improving cross-strait relations are yielding economic benefits for businesses.

The Financial Supervisory Commission, Taiwan's financial regulator, said in a statement late on Tuesday that it planned to allow qualified insurers to invest up to 10 per cent of their overseas investment limit in Chinese stocks and up to 5 per cent of the limit in bonds. Insurers will also be allowed to invest in host of other Chinese financial instruments including Treasury bills and exchange-traded funds.

The relaxation is a boon for Taiwan's insurers, who have had a tough time generating meaningful returns in the past because the local market is relatively mature and intense competition has sparked price competition that has eroded profitability.