UPDATE 1-China Merchants Bank applies for Taiwan presence

* Would initially seek to open representative office

* Joins Bank of China in showing interest in Taiwan presence (Adds background)

BEIJING, March 3 (Reuters) - China Merchants Bank said on Wednesday it had applied to open an office in Taiwan, as Chinese banks rush to build up a presence on the island after the signing of a cross-strait financial services agreement last year.

The bank, China's sixth largest, is aiming to initially open a representative office in Taiwan, a former political rival that all but banned such investments before a recent thawing in ties across the Taiwan Strait.

"We have many Taiwanese clients on the mainland," China Merchants Bank (600036.SS)(3968.HK) president Ma Weihua said on the sidelines of the opening Chinese People's Political Consultative Conference in Beijing.

"We'll be able to know our clients better through a representative office in Taiwan."

Business ties have flourished across the Taiwan Strait in the last 20 years, but financial firms in China and Taiwan were largely prevented from investing in each others' markets as tensions lingered between the former Cold War rivals.

That has changed under the administration of China-friendly Taiwan President Ma Ying-jeou, who has eased many restrictions on travel and investment between Taiwan and China in the nearly two years since he took office.

A number of banks on both sides of the strait have expressed interest in opening branches or taking stakes in cross-strait peers since Taiwan and China signed a memorandum of understanding late last year paving the way for such investments.

Bank of China (3988.HK)(601988.SS), China's biggest foreign exchange lender, said earlier this year it would apply to set up outlets in Taiwan. [ID:nLDE60E10C]

Sources also previously told Reuters that ICBC (1398.HK)(601398.SS), China's largest bank, was interested in buying a stake in Cathay Financial (2882.TW), Taiwan's largest financial holding company. ICBC later denied it had any such plans.

(Reporting by Michael Wei and Samuel Shen; Writing by Doug Young; Editing by Jonathan Hopfner)