TAIPEI(Reuters)-- Taiwan President Chen Shui-bian said on Tuesday he has accepted the resignation of Premier Frank Hsieh in a long-expected cabinet reshuffle after the ruling party's crushing defeat in December local government elections.

Under Taiwan's political system, the president appoints the premier who forms the cabinet and runs day-to-day government. The president sets policy towards China, which considers Taiwan a renegade province, and is head of the military.

Chen said he would nominate a new premier before the Lunar New Year, which starts on Jan. 29. Taiwan media have speculated that Chen's former chief of staff, Su Tseng-chang, will get the job.

"I have accepted his resignation. He has stepped down after accomplishing his job," Chen told reporters in Taiwan's frontline island of Quemoy, where the president was visiting troops.

Chen's Democratic Progressive Party's (DPP) won just six of 23 mayoral and county magistrate seats in local elections on Dec. 3, with the rest going to the opposition Nationalist Party (Kuomintang or KMT) and its allies.

The DPP advocates a separate Taiwan identity, while the KMT and its allies oppose Taiwan independence and favor closer ties with China. Beijing has viewed Taiwan as a breakaway province to be brought back to the fold, by force if necessary, since the end of the Chinese civil war in 1949.

"I hope the new cabinet can be speedily formed before the Lunar New Year," Hsieh told a news conference in Taipei, adding that he will formally resign with the entire cabinet next Monday.

Su resigned as chairman of the DPP to take responsibility for the defeat but many voters and analysts said he was not to blame.

The DPP was mainly defeated by a poor administrative record during Chen's five years in office and a corruption scandal involving a former presidential aide, media opinion polls showed.

Chen's personal approval rating plummeted to a record-low 10 percent after the election, according to one survey by TVBS.

The KMT had urged Chen to reshuffle his cabinet and seek a French-style cohabitation, in which the president and premier belong to different parties.

But analysts say deep mistrust between the ruling and opposition parties and ideological differences over Taiwan's ties with China make a coalition government highly unlikely.