Taiwan and China have conducted rare talks on exchanging intelligence agents jailed on each side, in a further sign of warming ties between the former rivals, local media reported Monday.

Representatives from China asked Taiwan to release former army general Lo Hsien-che, the highest-ranking Taiwanese official to be convicted of spying for China in Taiwan, the Taipei-based China Times said.

"The demand was flatly rejected" in the discussions held in Southeast Asia, the paper said, citing a national security source.

"It would have caused waves of disturbance if Lo were released."

The talks broke down after China rejected Taiwan's demand that it release senior intelligence agents Chu Kung-hsun and Hsu Kuo-chang, the paper said, without specifying when they took place.

The duo, both colonels in Taiwan's Military Intelligence Bureau, were kidnapped in Vietnam and taken to China in 2006, the paper said.

Taiwan's defence ministry declined to comment on the report. But National Security Bureau director Tsai Der-sheng confirmed early this month that government units have been striving to free the pair.

China still claims Taiwan as part of its territory awaiting reunification, by force if necessary, since the two split in 1949 at the end of a civil war.

Ties have improved markedly since Ma Ying-jeou of Taiwan's China-friendly government came to power in 2008. He was re-elected in January 2012.

But the former arch-rivals still spy on each other. In 2012 Taiwan's top court rejected an appeal by Lo, who was jailed for life in the toughest punishment meted out in an espionage case in decades.

He was suspected of handing over to China information relating to a project that gave the Taiwanese military some access to US intelligence systems.

According to Taiwanese media reports, he fell for a honey trap set by a female Chinese agent while stationed in Thailand and received about $1 million from China for his services.