Vanuatu's Foreign Minister, Barak Sope, says a dispute over granting diplomatic status to Taiwan could split the multi party coalition.
The Prime Minister, Serge Vohor, secretly negotiated the arrangement in Taipeh last week, but the Council of Ministers on Wednesday rejected the plan.
Foreign Minister, Barak Sope, says the coaliton agreement spelt out a one China policy and the Council of Ministers has reaffirmed this.
The Prime Minister's spokesman, Kal Moli, says the Council will change its view when it hears from Mr Vohor who is due back in Port Vila tomorrow.
Mr Moli says Taiwan has pledged money to kick start the economy in rural areas.
Mr Sope disputes this, but he says even it was the case, granting recognition to Taiwan is not in Vanuatu's interests.
He says the spat could undermine the coalition but Vanuatu's interests are more important than Taiwan's.