Taiwan courts bank to loosen China diplomatic squeeze, sources say

TAIPEI (BLOOMBERG) - Taiwan is studying a bid to host a top meeting of Central America's main regional bank, according to people with knowledge of the matter, in the self-ruled island's latest effort to break China's diplomatic squeeze.

Taiwan is considering applying to host the 60th annual board meeting of the Central American Bank for Economic Integration (CABEI) next year, according to the people, who asked not to be identified because the details haven't been made public.

The bank is one of the few international organisations of which Taiwan is a full member under its official name, the Republic of China (Taiwan). The lender is scheduled to decide on the 2020 host at its board meeting in Argentina next month.

A decision to host the board meeting in Taiwan could prompt an angry response from China, which has increased pressure on countries and multinational companies to avoid any actions that could imply sovereign status for the island.

While Taiwan has its own democratically elected government, China's Communist Party views the island as part of its territory and routinely blocks its participation in most international organisations.

China has learned of Taiwan's wish to host the meeting and is lobbying its allies in the region, including Cuba and Panama, to block the bid, according to people with knowledge of the matter.

China is also in talks with members of CABEI to join the organisation, with one of its main conditions that the bank drop its recognition of Taiwan as a separate nation, the people said.

Taiwan, which holds a 10 per cent stake in the bank, needs members holding at least two-thirds of the lender's shares to support its proposal to host the meeting.

Another person said the Ministry of Finance was close to deciding whether to officially submit its bid but is uncertain whether Taiwan can muster sufficient support among the other members. A bid would also need to be agreed to by Taiwan's president and premier.

Latin American and Caribbean nations have long been a stronghold of diplomatic support for Taiwan, favoring official ties with the island over mainland China.

While four of the bank's 13 other members officially recognise Taiwan, El Salvador, the Dominican Republic and Panama have switched recognition to Beijing since President Tsai Ing-wen was elected in 2016.

Finance Minister Su Jain-rong represents Taiwan on the bank's board. A spokesman for Taiwan's finance ministry declined to comment.

Taiwan, along with the likes of Argentina, Mexico and Spain, is one of six members of the bank from outside Central America and its only Asian member.

Taipei last hosted a board meeting in 1995. The CABEI is one of the supranational institutions able to issue bonds in Taiwan. Since 2014, it has issued approximately US$1.1 billion (S$1.49 billion) of notes.