Thailand was due to hold a signing ceremony on Phuket island on Thursday with Taiwan, which mainland China views as a breakaway province.

However, Thailand - which fears upsetting China - had second thoughts when Taiwan's labour minister asked to take part in the ceremony.

The Thai Prime Minister Thaksin Shinawatra said on Tuesday it was important not to disrupt relations with Beijing. "China might be concerned by this since we have adopted a one-China policy," he told reporters.

At least 120,000 migrants from Thailand work in Taiwan, many of them in the construction industry.

Better deal

The accord promotes a framework for Taiwanese firms to hire migrants through government agencies instead of private employers.

The new system would cut out high fees paid to middle men.

Thai workers are believed to earn about $400m a year in total from jobs in Taiwan, according the Taiwan Labour Affairs Council (LAC).

However it now unclear when the agreement will be signed.

Visa for minister?

The governments of both mainland China and Taiwan claim to be the legitimate government of the whole of China - a dispute which dates back to the Communist victory in 1949 which ended the civil war.

Beijing regards any diplomatic recognition of Taiwan by third parties as a violation of its sovereignty. It has taken a robust stance when other countries have given visas to Taiwan's ministers.

Thailand's foreign minister has denied local press reports that the South East Asian country has refused a visa to Chen Chu, the Taiwan labour minister.

Foreign minister Surakiart Sathirathai said the government had found itself unable to upgrade the signing ceremony to ministerial level at short notice.

"We have to look into that because we are not ready," he said.

"China has not said anything or put any pressure on Thailand. We have a one-China policy," he added.

Thailand has a representative office in Taiwan and the two have trade relations, but Thailand does not give diplomatic recognition to Taiwan.