An annual five-day exercise drawing more than 20,000 troops and reservists has in the past ended with a live-firing show of military prowess watched by Taiwan's political and military elite.

Not this year, the defence ministry said - while the rest of the exercise will still go ahead across the island September 22-26, simulating an invasion by China, the closing drill will not involve live ammunition.

'Following a thorough evaluation, we've decided to cancel the live-firing display,' it said in a statement.

The new China-friendly Kuomintang administration of President Ma Ying-jeou said the show and preceding rehearsals were a 'waste of resources'.

Last year's exercises saw the military firing dozens of missiles and more than 15,000 artillery shells, a defence ministry official said.

China and Taiwan have been governed separately since the end of a civil war in 1949, but Beijing still sees the island as part of its territory awaiting reunification, by force if necessary.

China has repeatedly threatened to invade Taiwan should the island declare formal independence.

However, tensions across the Taiwan Strait have eased since Mr Ma was elected in March on a platform to boost the economy and improve ties with China.

The Taipei government has agreed not to deploy long-range missiles capable of hitting Shanghai, the China Times reported earlier this month, although it has started rolling out shorter-range cruise missiles.

The two sides resumed dialogue in June and a month later launched regular direct flights for the first time in nearly six decades.

The Ma administration has also allowed more Chinese tourists to visit the island and relaxed controls on China-bound investments, issues which had been shunned by the former pro-independence government. -- AFP