Jan. 13 (Bloomberg) -- Taiwan's opposition Kuomintang won a landslide victory in yesterday's parliamentary election, boosting its candidate Ma Ying-jeou's chances of winning the presidency in March.

The KMT, which favors closer links with China, won 81 of 113 seats in the new legislature, according to Taiwan's Central Election Commission, compared with 27 for the independence- leaning Democratic Progressive Party.

Ma, 57, leads his DPP rival Frank Hsieh, 61, in opinion polls for the March 22 election. The DPP's popularity has fallen amid President Chen Shui-bian's focus on the island's sovereignty and allegations of corruption against his family. The U.S. and China, which considers Taiwan part of its territory, have also rebuked Chen for his pro-independence rhetoric.

``The legislative election is the first battle in the campaign for the presidency,'' said Chang Wu-ueh, a political science professor at Taipei's Tamkang University. ``Doing well boosts the KMT's chances of winning the war.''

The new Legislative Yuan is half the size of the previous one after reforms to synchronize its election with the presidency and to make it more effective.

``We have seen the results and offer our congratulations to the people of Taiwan for a successful democratic election,'' said Edgar Vasquez, a spokesman for the U.S. State Department. ``We look forward to continued, close, unofficial relations with the people of Taiwan.'' Vasquez declined comment on the significance of the Kuomintang's victory in the elections.

KMT Control

The KMT retained control of parliament after losing the presidency to Chen, leading to gridlock and delays in enacting laws including last year's budget. Taiwan's economy shrank in 2001, with growth wavering between 3.5 percent and 6.2 percent since then after climbing at least 4.6 percent each year during the 1990s.

``This is the beginning of our responsibility,'' Ma said last night. ``We must use this victory as the biggest tool to help win the presidential election.'' He has pledged to raise growth and cut unemployment by easing trade and investment restrictions with the mainland.

Chen, 56, who narrowly won the 2000 and 2004 presidential elections, has said that Taiwan's investments in China are already too high and greater integration threatens the island's sovereignty.

Chen Departs

``We lost the legislative election, we mustn't lose Taiwan,'' Chen said last night after resigning as the DPP's chairman to accept responsibility. Chen left today for a pre- scheduled trip to visit Central American ally Guatemala.

Chen has called for a referendum on joining the United Nations to be held with March's presidential election, a move the U.S. calls provocative and that China warns it won't tolerate. China has threatened to invade Taiwan if it declares independence.

Two referenda held in conjunction with yesterday's election failed because only 26 percent of eligible voters participated. A vote on whether the KMT should give back assets gained during its five decades governing Taiwan received 86 percent of support, while an opposition-proposed vote on a crackdown on official corruption garnered 51 percent.

The DPP won 35.7 percent support in the 2004 legislative elections, while the KMT and the PFP won 46.7 percent.

``We have given Chen a chance for eight years,'' said Chang Yi-shue, 57, a community bus driver. ``What we want now is to improve the economy and have better relations with China. We want the status quo, but we want jobs and a better economy.''

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

Last Updated: January 13, 2008 01:44 EST