Taiwan President Ma Ying-jeou hailed a Taipei-Beijing trade pact, to be signed later on Tuesday, as "another step towards peace and prosperity."
Ma said the Economic Cooperation Framework Agreement (ECFA), to be signed in Chongqing, China, would further expand cross-Strait trade and prevent Taiwan economy's being marginalized, dpa reported.
"Cross-Strait peace has moved another step forward and is more solid," he said.
Ma said the ECFA will benefit not only Taiwan, but also the Asia-Pacific and other regions. "They all can see that this is a positive development."
But he called on the military to remain vigilant.
"Our potential enemy is on the other side (of the Taiwan Strait), So we must build a small yet strong army and buy necessary weapons as war deterrence," he said.
The ECFA is hailed as the most important agreement between the territories since Taiwan and China split at the end of a civil war in 1949.
The ECFA is a free trade agreement in all but name, as China sees Taiwan as a breakaway province and does not consider business with the island to be international trade.
China has warned it would use force to recover Taiwan, if Taipei indefinitely delays unification or declares independence.