Taiwan's aging, authoritarian president, Chiang Ching-kuo, has shown unexpected flexibility toward his domestic opponents recently, allowing them to take steps toward the formation of a political party.

Until now, the ruling Nationalist Party, or Kuomintang, has banned political parties and other forms of organized political opposition. Under martial-law provisions imposed in 1949, the authorities have restricted the freedom of assembly and other political rights.

President Chiang has not publicly explained his new stance, but most observers think he has been motivated in part by a desire to avoid the kind of confrontations that recently have shaken the Philippines and South Korea.

One foreign diplomat said Chiang may be preparing the ground for his successors, who are likely to rule in a collective leadership once Chiang passes from the scene. A collective leadership, he said, would have to rely on more public support. The ailing Chiang, 76, has wielded near absolute power for the past decade. But no such single strong leader has emerged to succeed him.

In early May, the Kuomintang announced that a high-level, 12-member group would study ways to deal with four "sensitive issues." These are National Assembly and provincial government elections scheduled for later this year, martial law and the ban on forming new political parties. This seemed to be Chiang's way of saying these issues might be up for revision, political observers and foreign diplomats said.

On May 7, Chiang opened a dialogue with the opposition by urging Kuomintang members to exchange views with "all sectors of society." He supported contacts between ruling party members and opposition leaders that had been arranged by four professors from National Taiwan University.

On May 10 members of the ruling party held their first formal talks, with opposition leaders and approved opposition plans to establish permanent branch offices for their Public Policy Association, a loose-knit structure that resembles a political party.

Chiang's initiative has aggravated splits among factions in the opposition, known as the tangwai, which literally means "outside the party." Some opposition leaders want nothing to do with the Nationalists. Others, like Antonio Chang, editor-in-chief of an opposition monthly magazine, favor negotiations with the ruling party.

"Maybe over the long run, we'll be able to form more than one party and then a coalition," the editor said. "Dialogue with the ruling party means a kind of recognition. It means they're treating us as legitimate."

Some opposition politicians are convinced that quiet U.S. pressure has contributed to Chiang's decision to relax his rule.

Kang Ning-hsiang, a moderate opposition leader and publisher of a monthly opposition magazine, said Chiang wants to create a "democratic image" for Taiwan, partly to please the United States and partly to accommodate the native Taiwanese, who make up 85 percent of Taiwan's population of 19 million and who have long complained that Chiang discriminates against them.

The small, aging leadership came to Taiwan from the Chinese mainland after World War II. It runs the Kuomintang, military, security apparatus and executive bureacracy.

Kang, who participated in the first two meetings with the ruling party, said that if the opposition could gain legal status and the right to organize openly, many people who once feared supporting the opposition would join it.

But Kang, 47, is being called a "right-wing opportunist" by some of the young activists who disapprove of negotiations with the Kuomintang.

"The Kuomintang is very smart and can control the situation," said Daisy S. Pen, a young opposition magazine editor and member of a group called the League of Opposition in Taiwan. "Negotiations mean give and take, and we have only a few things that we can give," she said.

Pen participated in a demonstration on May 19, the 38th anniversary of the imposition of martial law, in which several hundred activists attempted to march from a temple in downtown Taipei to the presidential palace. It wa described as one of the largest demonstrations to occur here in recent years to protest martial law.

Ruling party hard-liners said the demonstration showed that the opposition was not responding properly to President Chiang's offer of a dialogue.

Taiwan University Prof. Lee Hong-hsi, who helped organize contacts between the two sides, said radicals on both sides are hoping for a conflict. "They think that if there's a conflict, it will increase their power," he said.

Lee said a major problem was the lack of any concept of a loyal opposition in the Chinese tradition. To ruling party hard-liners, he said, anyone calling himself an opponent of the government has to be a traitor.