President Ma Ying-jeou said that maintaining the status quo was necessary to stop relations between Beijing and Taiwan from worsening.
The leading candidate in the 2016 presidential race opposes the condition for formal talks and advocates a more guarded approach to relations with Beijing.
China sees democratic, self-ruled Taiwan as part of its territory, an outgrowth of the Chinese civil war of the 1940s, and insists on eventual unification.
"Seven years ago, our ties with China . Were caught in a vicious cycle, but we've turned it into a virtuous cycle," Ma, who must step down in May due to presidential term limits, said in his final National Day speech.
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"The current status quo didn't just drop out of the sky. It can't be taken for granted," Ma told government officials and foreign diplomats during the televised speech.
Opposition Democratic Party candidate Tsai Ing-wen leads in polls ahead of the Jan. 16 election. When her party ruled from 2000 to 2008 and advocated Taiwan's legal independence from China, Beijing fumed and occasionally threatened to use force.
Tsai says she wants dialogue with China, but has not proposed conditions that the other side accepts. Her supporters fear today's dialogue process will threaten Taiwan's de facto independence.
Lagging in the polls, the ruling Nationalist Party candidate, former teacher Hung Hsiu-chu, is expected to end her presidential bid later this month. The party would then pick a new candidate.