UPDATE 1-Taiwan ASE's China unit mulls A-share listing

(Recasts with quotes and details)

By Baker Li and Sophie Taylor

TAIPEI/SHANGHAI, July 31 (Reuters) - Taiwan's ASE (2311.TW), the world's top chip packager, is preparing a China listing for its Shanghai unit, even as Taiwan loosens restrictions to bring more such listings to its own stock market. Advanced Semiconductor Engineering Inc's (ASE) (ASX.N) Shanghai unit is in the process of preparing an A-share initial public offering, the unit said on Thursday in a statement sent to the official China Securities Journal.

"The listing will make it easier for us to raise funds," said an ASE official, who declined to be identified.

The Shanghai unit has a capital of $194 million, but the official declined to give a timetable for the listing. The unit was being advised by Great Wall Securities.

ASE, which also tests microchips for its clients, has invested a total of $353.4 million in China, accounting for about a quarter of its capital.

"That makes sense if they raise funds there because we think Taiwanese semiconductor companies will invest more in China," said Alex Huang, vice president of Taiwan's Mega International Securities.

"Downstream PC companies have invested a lot of money in China but upstream semiconductor companies will enjoy a faster pace in investments in the coming years."

In April, ASE's board approved a rights issue worth T$1.97 billion ($64 million) to raise funds for expansion, after Taiwan in late March elected a new president, whose party favours closer economic ties with the mainland.

Taiwan semiconductor firms have complained for years that tough domestic restrictions designed to keep their best technology at home put them at a competitive disadvantage to global rivals that can take advantage of China's cheap labour and closeness to customers.

On Tuesday, Taiwan said it may loosen restrictions to allow Chinese firms to list on its stock exchange, in the latest sign of warming ties across the Taiwan strait.

Under a plan being considered Taiwan would allow companies, including ones 100 percent owned by Chinese parties, to sell their shares in Taiwan.

Currently only firms that are 20 percent or less owned by China parties can apply for such listings. (Reporting by Baker Li and Argin Chang in Taipei, Sophie Taylor and Rujun Shen in ShanghaiI; Editing by Ken Wills)