China has hit out at Taiwan's President Chen Shui-bian after he made a strongly pro-independence speech on Sunday.
Mr Chen set out a "four wants" policy for Taiwanese independence
Mr Chen said Taiwan should pursue independence, write a new constitution and change its official name from "Republic of China" to Taiwan.
China's Foreign Minister Li Zhaoxing said anyone wanting to split Taiwan from the mainland was a "criminal".
The row came as China opened its annual session of parliament and announced a hike in defence spending.
Mr Chen, in a speech to a pro-independence group on Sunday, said: "Taiwan should be independent".
"Taiwan is a country whose sovereignty lies outside the People's Republic of China," he added, referring to China by its formal name.
Ruled by separate governments since end of Chinese civil war in 1949
China considers the island part of its territory
China has offered a "one country, two systems" solution, like Hong Kong
Most people in Taiwan support status quo
He spoke of a "four wants" policy - namely independence, a new constitution, further development and a change to the country's officially designated name.
Since taking office, President Chen has sought to emphasise the island's separate identity, the BBC's Caroline Gluck in Taipei says.
But his latest comments are his strongest since taking office and raise new worries of increased tensions with China as well as Taiwan's main ally, the US, our correspondent adds.
Those fears contributed to falls on Taiwan's stock market on Monday and a weakening of the Taiwan dollar against the US dollar.
Opposition leaders accused him of being irresponsible and putting Taiwan at risk of a possible war with China.
China sees Taiwan as part of its territory and has threatened to use force if the island ever moved to declare formal independence.
The United States is committed to supplying Taiwan with defensive weapons, but opposes any Taiwanese provocation of China.
In response to Mr Chen's comments, China's Foreign Minister Li Zhaoxing told Taiwanese reporters in Beijing: "Don't listen to local leaders".
"Whoever wants to split away will become a criminal in history".
Chinese Premier Wen Jiabao reaffirmed his government's view on Taiwanese independence in a speech to the opening session of the National People's Congress.
He offered to resume talks with Taiwan but insisted the island must first accept the one-China principle.
"We firmly believe that with the efforts of all Chinese people, including our Taiwan compatriots, complete reunification of China will definitely be realised," he told delegates.
Mr Wen also used his two-hour opening address - in which he called for more sustainable economic growth - to confirm China's plans to strengthen its armed forces.
Amid increasing international concern at the country's expanding military, China on Sunday announced a 17% increase in the defence budget for 2007.
Taiwan's defence ministry warned that the move not only upset the military balance across the Taiwan Strait, but also increases "the potential for a disruption to peace and stability in Asia".