The U.S. and Taiwan will work together on infrastructure development in developing countries in Southeast Asia and Latin America, officials at the U.S. Embassy in Taipei reported Wednesday, Sept. 30.

According to Taiwan News, both parties expect to hold a meeting soon on how to adapt supply chains and improve knowledge sharing and training under the agreement signed on Sept. 17.

Taiwan began to form working groups to investigate issues related to infrastructure and energy markets in the Americas and Southeast Asia after U.S. Treasury official Mitchell Silk proposed the framework during a visit to Taiwan last year.

As reported by the South China Morning Post, the plan establishes a working group led by the U.S. Department of Treasury and the Taiwanese Ministry of Finance to identify and promote public-private sector collaboration in infrastructure investment.

With the agreement between the two countries, bilateral relations would reach a new level. The initiative would pose a challenge to China and its ambitions to develop the so-called belt and road mega-project.

As Reuters noted, the United States suspects that the mega-project, which includes the construction of roads, railroads, and other facilities that would interconnect Europe with Asia, would mainly plunge the countries in China’s orbit into a so-called debt trap.

Debt diplomacy uses secret loans to extract economic or political concessions from the debtor country when it becomes unable to honor its debt.

According to the U.S. Embassy in Taipei, the new plan would support “quality infrastructure in emerging markets.” At the same time, the Taiwanese foreign minister said the initiative splices the U.S. Indo-Pacific strategy with Taiwan’s New Southbound Policy.

The New Southbound Policy aims to boost Taiwan’s economic ties with southeast and south Asia and cut its reliance on China.

Taiwan’s top U.S. official, Brent Christensen, highlighted the future project as a platform to strengthen the most resilient supply chains in the Indo-Pacific.

Like many other countries, the United States has no formal diplomatic ties with Taiwan. According to Reuters, it is still the island nation’s largest international sponsor and the largest arms sponsor.

Since the former leader of the Democratic Progressive Party, Tsai-Ing Wen, became president of Taiwan, arms deals with the United States have increased due to constant threats from the Chinese Communist Party to its sovereignty and democratic system,

Last September, both the United States and Taiwan said they were seeking agreements with like-minded democratic countries to bring about a change in global supply chains during the coronavirus pandemic, as Washington seeks to alleviate its economic dependence on China.