Taiwan Cooperative Bank said it received approval from the People's Bank of China on Wednesday to open a representative office in the mainland's capital.

The bank said in a statement that it expects to formally launch the office by the end of the year after necessary preparations.

Also getting green light from the mainland's central bank is Taiwan's Hua Nan Commercial Bank Ltd, a flagship firm of Taiwan-listed Hua Nan Financial Holding Co.

The bank located its first mainland office in the southern coastal city of Shenzhen. But these two banks are still waiting for the issuance of formal licences after the initial approval.

This is the second batch of Taiwanese banks to be allowed into the mainland. Chang Hwa Commercial Bank and the United World Chinese Commercial Bank got the first approval in March for representative offices in Kunshan from East China's Jiangsu Province and Shanghai respectively.

Analysts said the latest go-ahead underlines steady progress in the financial opening up of the mainland to Taiwan.

More Taiwanese banks are still lining up for entry to the mainland, including China Trust Commercial Bank, the Land Bank of Taiwan and Taiwan's First Commercial Bank, which also submitted their application late last year.

"But Taiwanese banks will still have to break the obstacle to start full services on the mainland," said Liu Yingxian, director of Economic Division of the Institute of Taiwan Studies in Beijing.

"The licences now are only given to representative offices. And that is still far from authorizing them to do the real business," she said.

Under the mainland regulations, overseas banks have to first set up representative offices in Chinese cities, which can later be developed into branches that are licensed to do real business.

Presently, representative offices can only do research work or information gathering to enhance their knowledge of the mainland market.

But with rapid trade and investment growth across the straits, it is an unavoidable trend to fully open up the financial sector for both sides, said Liu.

"That is what the Taiwanese bankers are eying and they have just taken their first step," she said.

A spokesman with the Taiwan Cooperative Bank said the bank would send staff to Beijing for the preparation of the new office next week, reported the International Financial News in Shanghai.

Establishing an office in Beijing will make it more convenient for the bank to acquire financial information and keep track of the latest movement of government policies, the spokesman said.

An official with the Hua Nan Commercial Bank Ltd, which chose Shenzhen as its foothold, said the city has many Taiwan investments and the bank has kept close co-operation with the parent companies of these firms.

Of the mainland banks, none have set up offices in Taiwan so far. But several State-owned banks from the mainland, including the Industrial and Commercial Bank and China Construction Bank, were recently permitted to open direct remittance links across the straits.

The move, cheered by investors and banks from both sides, greatly lowered operational costs during remittances between the mainland and Taiwan.

Mainland statistics indicate that Taiwanese investors poured US$60 billion of investment into more than 40,000 businesses on the mainland, but before the latest policy-loosening, they had to make remittances and account settlements through third parties, mostly banks in Hong Kong or the United States.