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President Lee Teng-hui on Sunday urged markedly better relations with the rival Communist government in Bei-jing as a first step toward eventual reunification of Taiwan and China.

For the first time, a Taiwan president publicly indicated a desire to drop the country's 40-year-old China policy known as the "three nos" - no official contact, no negotiations and no compromise.Lee, speaking at his presidential inauguration ceremony, proposed establishing "channels of communication" with China. He said the two countries should "completely open up academic, cultural, economic, trade, scientific and technological exchange to lay a foundation of mutual respect, peace and prosperity.

"We hope then, when objective conditions are ripe, we will be able to discuss the matter of our national reunification," he said.

But Lee said before such relations could be established, Beijing must renounce the use of force against Taiwan, end its policy of isolating Taiwan diplomatically, and promote democracy and a free economic system in China.

Lee heads the Nationalist Chinese government that has been based on the island of Taiwan ever since losing a civil war to communist forces on the Chinese mainland in 1949.

The Nationalists still claim to be the rightful government of all China, and Beijing regards Taiwan as renegade province.

While Beijing previously has indicated it would not meet the conditions set by Lee, the speech clearly was designed to reflect Taipei's desire to gradually improve relations with its neighbor across the Taiwan Straits. Recently, civilian and business contacts have been growing between the two sides.

The president also expressed a desire to end within two years the "Mobilization for the Suppression of the Communist Rebellion," which dates from 1948.

In his speech, Lee also stressed his commitment to bring more democracy to Taiwan, but his nomination of Taiwan's only four-star general as the new premier has led opposition politicians and intellectuals to question the government's commitment.