Foreign Minister Francisco Ou said the island would use the situation to gauge whether China would take up President Ma Ying-jeou's offer of a diplomatic truce, and an end to so-called "chequebook diplomacy".

"Existing diplomatic ties with Paraguay are a barometre of the Chinese mainland's sincerity with respect to the call for a diplomatic truce," Ou told reporters.

Paraguay is one of 23 countries that recognises Taiwan rather than China. The two split in 1949 at the end of a civil war.

Paraguay's president-elect Fernando Lugo, a leftist ex-bishop elected in April, is reportedly seeking to normalise ties with Beijing when he takes office next month.

Taiwan and China have in the past used generous financial packages, or "chequebook diplomacy", to ensure the loyalty of governments or persuade them to switch allegiance, especially in Africa, Latin America and the Pacific.

But in a shift of strategy, Ou said last month that his ministry would work to strengthen ties with its allies rather than try to lure countries away from Beijing.

Ou said Paraguay's incoming government has asked for 71 million US dollars in aid from Taiwan, but that Taipei has yet to finalise its aid package.

Ma, who took office on May 20, has ushered in a new era of warming ties between Taiwan and China. Earlier this month, the two sides launched regular direct flights for the first time since their split.

Taiwan's new president is reportedly mulling a trip to the Dominican Republic and Paraguay next month -- its first overseas trip as the island's leader.

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