Taiwan and China are expected to forge a much-anticipated investment protection agreement in the next round of high-level talks in August, officials and media in Taipei said Sunday.

An agreement on investment protection has been high on the bilateral agenda of China and Taiwan since the two former rivals signed a sweeping trade pact in the middle of 2010.

The investment deal was earlier expected to be hammered out in June but was put off, fuelling speculation over the negotiations.

According to Taiwanese media, the problem is Chinese reluctance to accept a dispute resolution mechanism, fearing that it would imply tacit recognition of Taiwan sovereignty if it were to treat both parties on an equal basis.

"The talks will be held before the middle of August even though we still cannot reveal the exact date as of now," said an official from the quasi-official Straits Exchange Foundation, a unit in charge of contact with Beijing in the absence of formal diplomatic ties.

The agreement, seen as a sign of warming ties, could be inked in upcoming talks in Taipei between Taiwan top negotiator Chiang Pin-kung and his Chinese counterpart Chen Yunlin on August 9, according to the United Daily News.

Taiwan and China were split in 1949 at the end of a civil war, and Beijing has refused to renounce its use of force to take the island if necessary.

Yet ties between Taiwan and its giant neighbour have improved significantly since the Beijing-friendly and economics-focused Kuomintang party took power in Taipei in 2008.

In June 2010 Taiwan and China signed the landmark Economic Cooperation Framework Agreement (ECFA), a pact widely characterised as the boldest step yet towards reconciliation.

Taiwan has been a major investor in China in recent years, providing more than $100 billion in financing, according to some estimates, as well as crucial technological know-how.