TAIPEI, Oct 2 (Reuters) - Cathay Financial (2882.TW: Quote, Profile, Research), Taiwan's biggest financial holding firm, said on Tuesday it plans to set up a property insurance company in China to tap the fast growing mainland market.

The move, which is awaiting regulatory approval in Taiwan and China, would help Cathay Financial expand beyond its life insurance tie-up in Shanghai with China Eastern Airlines (0670.HK: Quote, Profile, Research) (600115.SS: Quote, Profile, Research) (CEA.N: Quote, Profile, Research).

Cathay Financial plans to have its life insurer arm, Taiwan's top life insurer, and its Taiwan property insurance unit invest a total of 400 million yuan (US$53.3 million) in the new company, C.K. Lee, chief strategic officer of Cathay Financial, told Reuters by telephone.

If approved by regulators, the new firm would be the first Taiwan property insurance company operating on the mainland.

Shares of Cathay Financial had jumped 4.49 percent by 0509 GMT, outpacing the broader market's (.TWII: Quote, Profile, Research) 1.50 percent gain.

The Taiwan and China governments restrict Taiwan banks and property insurers from investing in the mainland or opening branches there, due to political differences.

China sees democratic Taiwan as a renegade province and has vowed to bring it back into its fold, by force if necessary.

"Forming a joint venture (with a Chinese company) is one direction we can consider. It allows us to use local resources and grow our business faster," Lee said.

Many overseas investors have been eager to invest in the Chinese market, where insurance premiums rose more than 20 percent to 371.8 billion yuan (US$50 billion) in the first half of this year.

(US$1 = T$32.56)

(US$1 = 7.5 yuan)

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