March 22 (Bloomberg) -- Ma Ying-jeou won Taiwan's presidential election, vowing to improve ties with China after eight years of pro-independence rule by Chen Shui-bian.

Ma, of the opposition Kuomintang, beat the Democratic Progressive Party's Frank Hsieh 58 percent to 42 percent, according to the Central Election Commission. About 75 percent of Taiwan's eligible voters cast ballots.

Both candidates advocated closer mainland ties, so the election pitted Ma's quicker approach against Hsieh's more cautious tack. Hsieh tried to portray Ma's policies -- such as working toward a peace treaty with China -- as exposing Taiwan to situations such as the crackdown on pro-independence protests in Tibet. The tactic may have helped pare to 16 points the 30 percentage point lead Ma had before the election.

``The Kuomintang's victory is a victory for Taiwan,'' Ma told thousands of cheering supporters during a victory speech at his party's headquarters.'' At a press conference after the speech, he said his first priority will be to establish direct air links with China and allow mainland visitors to Taiwan.

Ma's win ``means a chance for Taiwan to re-engage with the world and a way to move without giving the U.S. needless provocation,'' Sean King, vice president of New York-based business advisory company Park Strategies LLC said in Taipei. ``Chen put the one power that was willing to support Taiwan into a position of making choices it didn't want to be forced to make.''

`Smooth Handover'

Chen, in a statement posted on his Web site after the election, congratulated Ma and promised to ``maintain political stability before smoothly handing over'' power.

Both candidates' pledges to ease investment and travel restrictions helped Taiwan stocks outperform other Asian equities. As of March 20, Taiwan's benchmark Taiex index is up 3.6 percent in dollar terms this year, compared with the broader MSCI Asia Pacific Index's 14.9 percent loss.

The Taiex index rose 2.3 percent to a two-week high at the 1:30 p.m. close in Taipei yesterday, while the Taiwan dollar climbed 0.5 percent against the U.S. dollar.

The parties of Ma, 57, and Hsieh, 61, long have advocated different approaches to China. Ma's KMT, founded by mainlanders, has eschewed provocative calls for independence and argued that restrictions on business ties to China rob Taiwan of economic opportunities.

Hsieh's DPP, especially during Chen's eight years as president, has advocated independence and economic distance from China, lest Taiwan become too dependent on a sworn enemy that considers the island part of its territory. Hsieh has said he backs ``strengthening ties with China, but we shouldn't put all our hope and focus on the country.''

`Not Too Fast'

During the campaign, the two sides moved closer on the issue, sometimes seeming to cross into each other's traditional policy turf.

``We want to move fast, but not too fast,'' Ma said in an interview March 14, ruling out meeting Chinese President Hu Jintao in his first four-year term. Hsieh in February promised to invite Hu to Taiwan for talks on ``non-controversial'' issues.

``The realities are both candidates want an autonomous Taiwan,'' Robert Broadfoot, managing director of Political & Economic Risk Consultancy, said in an interview. ``You've seen recently where Ma's really had to stress the autonomy to go for that middle of the road voter.''

Direct Links

Both candidates promised more charter flights to the mainland. Taiwan has restricted direct shipping, air and postal links with the mainland since 1949, when the Kuomintang fled to the island after losing a civil war with the Communists. Traveling to the mainland can take as long as a trip to Indonesia, Ma said, adding: ``This is really very, very stupid.''

Ma's plan to allow more Chinese tourists into Taiwan may boost visitor arrivals to 3.6 million in 2009, up from last year's 270,000, according to Citibank head of Taiwan research Peter Kurz.

Direct air links ``will start another hotel building boom,'' said Douglas Hsu, chairman of Taiwan's Far Eastern Group, which has textile, shipping, banking and retail businesses. ``All of these visitors have to stay somewhere, and all of them will have to shop.''

Icy relations with China prevented Taiwan's economy ``from capturing the full benefit of being next to one of the fastest growing economies in the world,'' said Tony Phoo, Taiwan economist at Standard Chartered Bank in Taipei.

Under the island's investment limits, Taiwanese companies can't put more than 40 percent of their net value into China. Taiwan allows only limited mainland investments in real estate and none in its businesses.

China Investment

Ma has said he wants to allow Taiwanese companies to invest more of their assets in China within a year. A China policy paper on the Web site of Hsieh's DPP says ``the current passive restriction policy can be gradually adjusted.''

``Ma's proposals create a more favorable backdrop for economic growth,'' said Glenn Maguire, chief Asia-Pacific economist for Societe Generale in Hong Kong. ``Taiwan assets will look more attractive to international investors.''

Two referendums asking whether Taiwan should try to join the United Nations failed because fewer than 50 percent of the total electorate voted on the issue. China sees any attempt to join the UN as a move toward formal independence. One, proposal, backed by Chen, asked if it should apply under the name ``Taiwan.'' A competing KMT proposal didn't specify the name.

To contact the reporter on this story: James Peng in Taipei at jpeng7@bloomberg.net; Tim Culpan in Taipei at tculpan1@bloomberg.net.

Last Updated: March 22, 2008 10:57 EDT