Taiwan's main opposition Nationalist Party won the presidential election by a landslide yesterday, heralding improved ties with giant neighbour China which claims the self-ruled island as its own.

But President-elect Ma Ying-jeou said he would only consider signing a peace deal with China, an offer Beijing has made with conditions, if it stopped aiming missiles at Taiwan.

China has claimed Taiwan as its territory since the end of the Chinese civil war in 1949 and has threatened to bring the island under its control - by force if necessary. Taiwan says China has more than 1,000 missiles aimed at the island.

"Cross-Strait relations have stagnated, so we have to prioritise things," Ma told reporters after announcing his victory to thousands of supporters who screamed, blew party horns and set off fireworks in downtown Taipei. "First is normalisation of (economic) relations, and then a peace agreement. But, he said, "before we can talk about peace, we need to remove the threat".

Ma said he had no plans to go to China but hinted that he would visit other major nations before taking office on May 20. The United States, Japan and Singapore congratulated him.

U.S. President George W. Bush called Taiwan a beacon of democracy and said it and Beijing had to talk in order to build foundations for stability and refrain from unilateral steps.

"The election provides a fresh opportunity for both sides to reach out and engage one another in peacefully resolving their differences," he said in a statement.

Chinese President Hu Jintao offered broad peace talks with Taiwan earlier this month, but under the so-called "one China" policy, which defines the island and the mainland as part of a single country, a concept Taiwan's current government rejects.

Ma also billed himself as an economic revival president amid inflation and wage concerns that analysts said swayed the vote.

"Our economic policy has three points," he said. "One is to love Taiwan, another is infrastructure and industry and a third is to reach out to the whole world."

The 57-year-old Harvard-educated former Taipei mayor won 58 per cent of the vote, while the ruling Democratic Progressive Party's candidate Frank Hsieh got 42 per cent.

"I am deeply sorry. This is my personal defeat, not Taiwan's defeat, so don't be sad," Hsieh said in front of supporters who cried and hung their heads as he spoke.