TAIPEI, TAIWAN - Taiwan prosecutors found incriminating files in a computer connected to the disappearance of $29.8 million in a secret diplomacy case, media and officials said, as a senior leader quit the ruling party on Monday over the scandal.

The money, allocated in 2006 for development aid, was meant to get Papua New Guinea to ditch ties with China in favour of Taiwan.

Taiwan and China use chequebook diplomacy to vie for diplomatic friends abroad.

Prosecutors found e-mails in a notebook computer discussing how some of the proceeds would be split, media and officials said.

"From a lot of signs, the prosecutor suspects that the whole case is probably false diplomacy and a real scam," the China Times said.

Vice Premier Chiou I-jen quit the ruling party to take blame for the scandal as other party members called for a deeper probe into Chiou and other government officials.

"Apart from cooperating with the legal investigation, from today I am leaving my beloved Democratic Progressive Party and when I leave the government in the coming days I will forever retire from public service," Chiou said in a statement.

The Papua New Guinea flap comes about two weeks before President Chen Shui-bian leaves office due to term limits. It follows a series of scandals involving his family, aides and unpopular policy decisions.

China, recognised by 170 countries including the world's most powerful nations, has claimed self-ruled Taiwan as its territory since the end of the Chinese civil war in 1949 and has pledged to bring the island under its rule, by force if necessary.

Taiwan resists China by keeping its own stable of diplomatic allies, which now number 23 mostly small, impoverished nations in Africa, Latin America and the South Pacific.