Taiwan and China signed a historic trade pact yesterday in the boldest step yet towards reconciliation between the former archfoes, 60 years after the civil war that drove them apart.

The Economic Cooperation Framework Agreement, hailed by both sides as a milestone and a commercial imperative in an era of strong regional cooperation, was signed by senior delegates in the southwest Chinese city of Chongqing.

The signing of the agreement, by far the most sweeping ever between the two sides, marks the culmination of a Beijing-friendly policy introduced by Taiwan President Ma Ying-jeou after assuming power in 2008.

"Signing this agreement is not only an important milestone in economic ties between the two sides," said the leader of the Taiwanese delegation, Chiang Pin-kung.

"It's also a huge step forward for the two amid the trend of regional economic integration and globalisation."

In Taipei, President Ma said the pact meant peace and prosperity between China and Taiwan was no longer a distant dream but a reality "within our reach," with implications for the region as a whole.

"Everyone will be able to feel it. In particular, countries that previously had to pick sides between Taiwan and China can now simultaneously develop peaceful and prosperous relations with both," he told a group of businesspeople.

The agreement - a "win-win" formula according to Mr Chiang's Chinese opposite number, Chen Yunlin - is just about trade, according to the governments in Beijing and Taipei.