Beijing regards Taiwan as a renegade province and has warned it will respond with military force if the island takes steps towards independence.

In recent weeks China has unleashed a torrent of vitriol against Mr Chen's Democratic Progressive Party.

In the run up to the polls, Prime Minister Zhu Rongji declared the Chinese were ready to "shed blood" to stop the island splitting away.

But our correspondent in Taipei, Jill McGivering, says Beijing's sabre-rattling may have helped hand the presidency to the very candidate it did not want.

You Ying-lung, a DPP campaign strategist, said: "We were not intimidated by Zhu Rongji. Taiwanese do not bend under threats."

Turning point

Mr Chen's victory is a watershed in Taiwan's political history.

It is the first time the ruling Nationalist Party or KMT, in power for the last 50 years, has lost control of the top post.

"We have realised our forefathers' dreams for democracy. Taiwan shall have its first peaceful transfer of power," he added.

Trade

The key now will be whether Beijing is prepared to put aside its pre-election rhetoric and take seriously Mr Chen's insistence that he is not planning to declare independence.

Although the DPP has traditionally favoured splitting from China, Mr Chen has turned his back on this policy during the election campaign.

He has said Taiwan will only declare independence if China attacks.

China has in the past held unofficial contacts with the DPP, and Mr Chen has expressed interest in opening direct trade links with the mainland.

This is something China wants, but Taiwan's nationalist KMT governments have always refused.

Washington

Beijing will be looking minutely at everything Mr Chen says in the coming days. His early statements will be crucial in determining the way China responds.

It will also be watching for Washington's reaction.

On the eve of the election, US Defence Secretary William Cohen said if China increased the pressure on Taipei to abandon independence, then that would increase demands in the US Congress for more arms to be supplied to Taiwan.

Shows of military might by China have been a constant backdrop to the elections.

The current tensions were underlined by pictures of troops carrying out amphibious landing exercises in Saturday's Chinese newspapers.

But many analysts do not believe China has the capacity to carry out a full scale invasion of Taiwan and any military tension could cause it massive economic losses.