Pan-blue lawmakers on Wednesday voted to slash the budget for the production of the Hsiung Feng II-E, a locally developed cruise missile system, effectively freezing the program that had aimed to begin mass production next year.
Lawmakers from the Chinese Nationalist Party (KMT) said they feared that approval of the missile production budget would needlessly antagonize China.
"I am afraid that it would send wrong signals to all concerned, particularly when Chen Shui-bian's (陳水扁) administration is recklessly pushing toward the red line," said Su Chi (蘇起), a senior KMT member of the legislature's National Defense Committee.
The Ministry of National Defense had planned to produce 245 missiles and requested NT$34.6 billion (US$1.06 billion) over eight years from the classified portion of the ministry's budget, Su said.
The ministry had sought NT$3.8 billion for next year, he said.
Lawmakers instead cut the budget by one-third, froze another one-third and passed the remainder, Su said.
The missiles are believed to have a range of between 600km and 1,000km, putting potential targets such as Hong Kong and Shanghai within their range depending upon the type of engine used.
The missile has been developed to counter the threat from the approximately 1,000 missiles China has deployed opposite Taiwan.
Military sources have revealed that a small number of Hsiung Feng II-Es have already been deployed around the nation.
A final decision on the budget still requires review by the legislature, where pan-blues hold a slim majority.
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