Taiwan and China are expected to sign an agreement in October that will allow Chinese institutional investors to purchase shares on the Taiwan Stock Exchange, according to sources cited by AFP.

The exchange had previously been limited to Chinese currency; so the deal only shows that Taiwan is prepared to compete with other Asian economies that have been forging free trade agreements with Beijing in the past months, the publication said.

The move is part of the Economic Cooperation Framework Agreement initiative spearheaded by newly-installed Taiwan premier Wu Den-yih, who assumed his post last week.

The news service also added that the agreement would include rights for the island-state's banks to upgrade their offices to branch status in China. It is believed that the deal between the two countries will be signed in either Hong Kong, China, or Taiwan.