SUZHOU, China (Reuters) – A Taiwan Buddhist charity set up shop in China yesterday, a sign of the atheist Communist rulers' growing but still limited religious tolerance and part of a drive to win the hearts and minds of Taiwanese.

The Tzu Chi Foundation opened its China chapter in the form of a bookshop-cum-tea house in the historic eastern city of Suzhou in Jiangsu province, a popular investment choice for the Taiwanese companies which have pumped billions into the country.

Officials say Tzu Chi is the first overseas non-governmental organisation to receive the Ministry of Civil Affairs' blessing to operate in China. Normally they have to register with the Commerce Ministry as businesses.

But it is barred from preaching and cannot raise funds from ordinary Chinese without government approval on an ad hoc basis.

"We will not make it a point to preach when we do charity work on the mainland, but if people ask me my religion, I will say I'm Buddhist," foundation spokesman Rey-sheng Her told Reuters.

"We will use compassion to care for every suffering person and enlighten them to use love to help others," said Her, a former Taiwan television news anchor.

The opening of Tzu Chi's China chapter, housed in a traditional courtyard, was attended by Chen Yunlin, China's top negotiator with self-ruled and democratic Taiwan.

"The two sides of the (Taiwan) strait need this spiritual bridge . . . so that they can live in harmony," Chen said.

The Communist Party sees religion as a rival for the loyalty of the Chinese people and has maintained tight control over beliefs since taking power in 1949.

The Party has sought to use religion to help curb rising social unrest and fill an ideological vacuum in the post-Mao Zedong era which has eroded ethics and spawned graft.

In what appears to be growing tolerance, museums in Beijing and Shanghai hosted exhibits this year to commemorate the 400th anniversary of the death of Matteo Ricci, the Italian Jesuit who brought Christianity to China.

The launch of Tzu Chi's China chapter and the Ricci exhibits are in keeping with President Hu Jintao's 17th Party congress speech in 2007 that "religious figures and followers should play a positive role in promoting economic and social development". China keeps a tight lid on NGOs, but welcomes the millions of dollars they bring annually to make up for a dearth of government spending in public welfare and environmental protection.

Tzu Chi has played an active role in bringing relief to some of the world's biggest disasters, including China's devastating Sichuan earthquake in 2008, where more than 80,000 people died.

Tzu Chi was founded in 1966 by Buddhist nun Cheng Yen, known as Taiwan's Mother Teresa, and steers well clear of politics, one of the reasons it is allowed to operate in China, which claims sovereignty over Taiwan and insists on eventual unification.

"This policy of no-politics has served it in very good stead in China, which was initially suspicious of a Buddhist charity based in Taiwan," Mark O'Neill, author of "A Silent Revolution — the Tzu Chi Story", said in an e-mail.

The Chinese government is generally less fearful of Buddhism, with its home-grown roots, but maintains tight control especially in Tibet where monks have been jailed for supporting their exiled spiritual leader, the Nobel Peace Prize-winning Dalai Lama.