Chen, currently on a state visit to Panama, made the remarks in a pre-recorded televised speech marking Soldiers' Day Friday.

"We have been seeking peace in the Taiwan Strait and have taken various goodwill moves trying to help normalise cross-strait ties," Chen said.

The Taiwan leader Tuesday cancelled a military exercise scheduled for September 9 in a goodwill gesture after China reportedly scrapped a similar drill.

However, Chen said China's "blindness to cross-strait status quo" has caused disputes between the two sides and become the main obstacle to improving relations.

"The government pursues goodwill, reconciliation, active cooperation and permanent peace across the Taiwan Strait, but we will never sacrifice national sovereignty, safety and dignity as the price to better cross-strait ties."

China and Taiwan split in 1949 at the end of a civil war but Beijing still considers the island part of it territory to be reunified, by force if necessary.

Since Chen was inaugurated in May for a second term, China has stressed its long-standing vow to invade Taiwan should it declare formal independence.

Taiwan has to "be prepared for war in order to deter war" by strengthening its defence capabilities, Chen said.

He again criticized China for trying to rationalise its attempt to take the island by force with a proposed unification law, under which Taiwan is considered a "special political region" of the mainland.