Chen has made referendums a key election issue

Mr Chen was giving his first public reaction to a controversial referendum law which was passed on Thursday.

Mr Chen said it made such polls acceptable to the Taiwanese people, including those opposed to reform.

Correspondents say the suggestion is sure to infuriate China, which regards Taiwan as a renegade province.

Taiwan's parliament approved the legislation on Thursday, but in a form that was substantially weaker than the government's original draft.

An opposition coalition pushed through a clause that blocks referendums on the most sensitive subjects, including changing Taiwan's name or flag.

But Mr Chen said the passing of the legislation meant that the concept of the referendum had been made acceptable to the Taiwanese people, including "anti-democracy, anti-reform forces".

He said he was not satisfied with the opposition amendments, without specifying whether he would attempt to revise or repeal the bill.

Chinese concern

President Chen has made referendums a key issue in his campaign for re-election next March.

He said the new law would make it possible to hold a referendum at the same time as the presidential election on March 20, to safeguard Taiwan's sovereignty and security.

China has responded to Taiwan's passing of the referendum bill, saying it raises "grave concerns".

In the past, referendum was a taboo, now it's a bill Stage is set for presidential race

However, the statement from China's Taiwan Affairs Office suggested relief that the bill was passed in a watered-down version.

China has threatened to act if Taiwan makes any moves towards independence.

The BBC's Louisa Lim, reporting from Beijing, says China's worst-case scenario has not been realised.

Beijing had feared that if a mechanism for referendums was established, it could be used to force a vote on independence.

'Irresponsible'

The China Daily newspaper praised "rational" forces in Taiwan for weakening the bill, but the paper also cautioned that the vote "handed a time bomb to some separatist forces".

The opposition placed heavy restrictions on the new law

The move was "extremely irresponsible", the paper quoted Wang Kebin, secretary-general of the China Council for the Promotion of Peaceful National Reunification, as saying.

MPs in Taipei had considered several different versions of the referendum bill.

The version that was passed, written by the opposition which has a parliamentary majority, gives the legislature the power to screen potential referendum issues that might involve changes to the constitution.

The opposition was also successful in passing an article that said only the public and parliament could initiate a referendum.

President Chen had wanted the government to have the same power to call such a vote.

Opinion polls suggest that the majority of Taiwanese people prefer the ambiguous status quo of their island.

The BBC's Chris Hogg says the referendum issue used to be a taboo subject in Taiwanese politics. Fears that it would provoke China to use force stifled serious debate.

But, he says, politicians on all sides seem to have decided they can now use it to drum up support ahead of presidential elections next March.