(Adds military statement on 700 trapped)

By Ralph Jennings

CISHAN, Taiwan, Aug 11 (Reuters) - More than 700 people are trapped, possibly dead, in two southern Taiwan villages engulfed by mudslides after typhoon Morakot swamped the island, the military said on Tuesday.

More than 90 people, including 50 in Taiwan, have been confirmed dead since Morakot and tropical storm Etau cut a swathe through the region. Media reports said another three were killed in the crash of a helicopter, the only means of ferrying victims out of districts where all roads had been washed out.

Heavy rain in China toppled more than 10,000 dwellings.

Hu Jui-chou, a Taiwanese army major-general involved in rescue operations, said those trapped included people buried by a massive landslide in Hsiao Lin, a village of 1,000 in mountainous Kaohsiung county.

Many were also trapped in a second village, Namahsia.

"Trapped means they could be dead or alive," Hu said by telephone. "It very likely covers people buried in the Hsiao Lin mudslide."

Survivor Lee Chin-long, 50, said he watched as walls of mud and rock wiped out most of Hsiao Lin.

"I was watching from my house upstairs. The whole mountain just fell off. When I saw that, I started to run," said Lee, speaking from a shelter in the nearby town of Cishan, the hub of rescue operations.

"Almost every house was gone, except for a couple."

Military officers running operations said helicopter missions had found very few survivors though Taiwan's disaster agency said about 100 villagers had been rescued. About 600 people remained unaccounted for and presumed buried.

Army major-general Hu had earlier said that some residents might still be stuck near the village, with possibly 100 taking refuge in a tunnel.

HOMES, HOTEL WASHED AWAY

Torrential rain set off landslides across Taiwan, causing rivers to burst their banks and flooding farmland. A six-storey hotel was washed away as were many homes.

"We saw an entire hotspring area being wiped out and vehicles buried," said Wu Chao-neng, 52, as he got off a helicopter in Cishan after being rescued from a landslide in another village.

Victims arriving at a school in Cishan, some unconscious and on stretchers, were put in ambulances to be taken to hospitals.

Morakot left 23 dead in the Philippines and eight in China. Thirteen people have died in Japan from the effects of Etau. The storms have caused hundreds of millions of dollars in damage.

The typhoon has started to weaken over China's coastal regions after battering Taiwan. It caused floods in Taiwan's densely-populated south and farm-related losses on the island were estimated at more than T$7 billion ($213 million).

Taiwan financial firm SinoPac Holdings said the typhoon would likely widen by 0.5 percentage points the island's GDP contraction in the third quarter.

In China, rains caused damage estimated at 9.7 billion yuan ($1.42 billion), state media said. The finance ministry offered 102 million yuan ($15 million) in emergency aid to two provinces.

In Japan, Etau approached the island's central area and Tokyo, hours after a 6.5 magnitude earthquake tossed food and bottles from store shelves, disrupted transport and shut down a nuclear power plant for safety checks. [ID:nT322240]

Japan's weather agency warned of possible landslides and flooding, as the quake followed heavy rain. TV pictures showed one motorway partially washed out.

In addition to the 13 dead in Japan, 15 residents were reported missing in the western prefectures of Hyogo and Okayama. (Additional reporting by Ben Blanchard in Beijing, Chisa Fujioka in Tokyo and Rosemarie Francisco in Manila; Writing by Lee Chyen Yee, editing by Ron Popeski)

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