The pact is the 15th commercial agreement the two sides have struck since Ma Ying-jeou took over as Taiwan's president 2 1/2 years ago, promising to improve relations with the mainland.

The new medical agreement will facilitate cross-strait exchanges of information on epidemics in each other's territories and cooperation in the development of vaccines to counter any outbreak.

The deal also will allow the two sides to work together on the clinical trial of new drugs. Taiwan's budding biotechnology industry has been limited by the island's small market, and the new pact is expected to help accelerate the entry of Taiwanese products into the lucrative mainland market.

Chinese envoy Chen Yunlin and his Taiwanese counterpart, Chiang Pin-kung, signed the deal during meetings in Taiwan's capital, Taipei. The talks are part of Ma's effort to strengthen links with Beijing and reduce cross-strait tensions, which have eased to their lowest level since the island split from the mainland amid civil war in 1949.

"The agreement will serve as an important platform for the two sides to develop the biotechnology industry" together, Chiang said. Chen's deputy Zheng Lizhong said the signing of the pact helps "further the peaceful development of cross-strait relations."

During Tuesday's meetings, the two sides also agreed to allow more Chinese tourists to visit Taiwan, raising the current limit of 3,000 per day to 4,000 starting Jan. 1 next year.

However, the two sides failed to sign a planned investment protection agreement because China rejects Taiwan's demand that international arbitrators adjudicate investment-related disputes. Negotiators from the both sides said talks would continue over the pact and they hope to reach an agreement in the first half of next year.

Ma's efforts to engage China economically were crowned with the signing of a wide-ranging tariff reduction deal in June that his government says will help revitalize Taiwan's sluggish economy.

As negotiations were held Tuesday, dozens of anti-China activists protested outside the meeting venue. Without formally endorsing the protests, Taiwan's main opposition Democratic Progressive Party has voiced skepticism over the talks.

The DPP continues to insist that Ma's push for closer economic ties with Beijing could entice more Taiwanese firms to relocate to China and lead to rising unemployment. The party also says increased Chinese influence could erode the island's democratic character and threaten its de facto independence.