TAIPEI (Reuters) - Chinese President and Communist Party chief Xi Jinping will hold talks with the chairman of Taiwan's ruling Kuomintang (KMT) in Beijing next month, the KMT said on Friday, in what would be the first meeting between the heads of the two parties.

It will be the first visit to Beijing by Mr Eric Chu since he took the reins of the KMT after it suffered a heavy setback in local elections last November.

This trip is expected to bolster Mr Chu's influence. He has said repeatedly he will not join the presidential election race later this year, but he remains the most promising candidate to rival the candidate of the opposition Democratic Progressive Party (DPP).

Business ties between Taiwan and China have improved to their best level in six decades since Taiwan President Ma Ying-jeou took office in 2008. But both sides remain political rivals, with China viewing the democratic island as a renegade province.

Taiwan's pride in its democracy helps reinforce the unwillingness of many to be absorbed politically by China, w.hich has not ruled out force to ensure unification.

Thousands of young people occupied Taiwan's Parliament in March last year in an unprecedented protest against a planned trade pact calling for closer ties with Beijing.

But the KMT, the party of Chiang Kai-shek that retreated to Taiwan after losing the Chinese civil war in 1949, is perceived as being pro-China. The DPP is seen as leaning towards independence.