Francis Markus BBC Correspondent in Shanghai

The Taiwan airline Far East Air Transport said it has been granted rights to fly charter services to the mainland during the lunar New Year holiday period starting in late January.

The move marks a step forward in the two countries' diplomatic relations.

The approval had been granted by China's civil aviation authorities, the airliner said.

Far East Air Transport hopes to be the first Taiwan airline to be allowed to operate commercial flights into the mainland since 1949.

The move was announced simultaneously by the airline and Taiwan's government, although there has not yet been confirmation from China.

The flights would be to ferry thousands of Taiwanese business people and their families working in Shanghai home for the holiday.

Existing scheduled flights via Hong Kong and Macau are severely congested over the festive period.

Step forward

If the charter flights do get off the ground, it will mark a cautious step forward in the two sides convoluted diplomatic struggle.

Mainland airlines are not allowed to land in Taiwan either, but there could be still a long way to go before the two sides can find a basis on which the Taiwan Government will be willing to lift its blanket ban on direct transport links with China.

Flights to China are routed through Hong Kong or Macau

It continues to fear that doing so would carry too heavy a political price.

At the moment, all flights between Taiwan and mainland China must make a time-consuming detour to touch down in Hong Kong or Macau, and these charter flights, if they go ahead, will not be exempted from that either.

Taiwan's business community, pouring ever more investment into China, is strongly championing the lifting of the ban on direct links.

But the issue remains one of the few bargaining chips that the Taiwan Government holds in the diplomatic struggle with China, and Beijing, which regards Taiwan as a breakaway province, is also likely to be reluctant to make any move that could boost the standing of Taiwan's president Chen Shui-bian.

It regards him as pushing the island along a dangerous path towards formal independence.