The quake hit just before 8:00 am local time (0000 GMT) and had a magnitude of 7.4 according to the US Geological Survey, triggering tsunami warnings in Taiwan, southern Japan and the Philippines.
By 10:03 am Taiwan time, the Pacific Tsunami Warning Center said "the tsunami threat has now largely passed", but that people near coastal areas should stay alert.
An emergency message sent out by authorities around 10:14 am Taiwan time said "the tsunami triggered by the earthquake has gradually reached the coast of Taiwan".
"People in coastal areas are reminded to be vigilant and take strict precautions and pay attention to the dangers caused by sudden surges in waves."
A fire department official in Hualien county -- near the epicentre of the earthquake -- told AFP that "two buildings had collapsed and some people are believed to be trapped".
He provided no additional information.
In a televised national briefing, Taiwan's National Fire Agency said 26 buildings were reported "to tilt or collapse", though it gave no details on the location of the structures.
It also said no deaths or injuries have been reported so far.
The island of Taiwan is prone to earthquakes, with its residents accustomed to frequent tremors.
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