Two top Taiwanese officials have quit over the loss of $30m (£15m) of public money during a failed attempt to secure diplomatic ties with Papua New Guinea.
Vice Premier Chiou I-jen and Foreign Minister James Huang said they had resigned to take blame for the scandal.
The money was given to two men to broker a deal with PNG in 2006. They are suspected of embezzlement.
China regards Taiwan as part of its territory, and the island often courts small nations in a bid for recognition.
The resignation offers of both Mr Chiou and Mr Huang have reportedly been accepted.
Mr Chiou said at a news conference that he was standing down while the investigation took place, AFP news agency reports.
He added that the inquiry would prove his innocence.
Both China and Taiwan are often accused of using chequebook diplomacy to establish political friendships, especially in the South Pacific, Caribbean and parts of Africa.
The rivalry stems from the Chinese civil war.
After the Communist victory in 1949, their defeated foes, the Kuomintang, fled to Taiwan and set up a rival government.
Initially recognised by the UN and many Western governments as the legitimate rulers of China, Taipei lost its status to Beijing during the 1970s.
Beijing now opposes any moves for greater recognition of Taiwan as a separate entity, and fewer than 30 nations still have formal diplomatic ties with Taipei.