TAIWAN announced yesterday it was forming a cabinet council to ease, mounting tensions with China, and unveiled measures to shore up flagging economic confidence.
The Defence Minister, Mr, Chiang Chung ling, warned that China was massing troops for a large scale exercise near Taiwan but it remained unclear when the war games might begin.
"The President is extremely concerned over people's worries caused by cross strait (Taiwan China) relations," said the Prime Minister, Mr Lien Chan, in a statement announcing the working group, which includes several cabinet members.
"Today's meeting hopes to stabilise political and economic conditions and strengthen people's confidence so that the historic presidential election can be smoothly completed.
In a joint news conference, senior officials announced measures to stabilise the economy but independent economists said the stimulus package was insufficient to achieve its aims.
Officials said a stock market fund of Taiwan $200 billion (about £4.60 billion) would be established from funds provided mainly by banks, pension funds and insurance companies and invested at the fund's own discretion. But market analysts said pledges for the fund had not been received. They said private companies were unlikely to want to pour money into a stock market which lost 27 per cent last year and has fallen nearly 7 per cent since January 1st.
Meanwhile, Downing Street announced yesterday that the British Prime Minister, Mr John Major, will visit Hong Kong on March 3rd and 4th.
Mr Major is to fly to the British colony, due to be handed back to China on July 1st, 1997 following a summit in Bangkok of Asian and EU leaders on March 1st and 2nd.
On his way back from Hong Kong, Mr Major is to stop in Seoul for talks with the South Korean President, Mr Kim Young-sam.
A presidential spokesman in Seoul said earlier yesterday the two leaders would discuss economic and trade co operations.
Britain's relations with China, over Hong Kong have been under strain because of Beijing's anger over the introduction by the governor, Mr Chris Patten, of democratic reforms.