Feb. 18 (Bloomberg) -- Taiwan Premier Frank Hsieh named Taiwan Institute of Economic Research President Wu Rong-I to be vice premier, betting the economist can help strengthen the cabinet's capability to boost the economy.

Kaocheng-Sheng, section chief for Taiwan's Government Information Office, made the announcement today.

Wu became the top candidate for the job after Hsieh failed to persuade opposition Nationalist lawmaker P. K. Chiang, an ex- economics minister and Taiwan's top economic planner, to take the post.

Taiwan's economy will grow at least 5 percent this year, after rising about 5.9 percent last year, bolstered by two major investments and private participation in state infrastructure projects, the island's top economic planner said on Jan. 27.

Formosa Plastics Corp. and Chinese Petroleum Corp. are separately investing a total of NT$500 billion ($16 billion), said Hu Sheng-cheng, chairman of Taiwan's Council for Economic Planning and Development. The government has also promoted private participation in its infrastructure plans, luring an additional NT$130 billion, he said.

Wu is an adviser to President Chen Shui-bian and had close relations with the former Nationalist government, according to the Liberty Times yesterday. Nationalists lost power in 2000 after Chen of the Democratic Progressive Party won the presidential election.

Taiwan Institute of Economic Research was founded by Koo Chen-fu, also founder of the Chinatrust Group.

The Economic Daily News today raised concerns over the cabinet's future policy toward China as Wu was previously seen conservative on policy toward China, having called for caution and high risks in investment in China.

Growth in Taiwan's $340 billion economy will be dependent on easing relations with China, Hsieh said. The premier said he'll urge the two sides to promote diplomacy and stability. Taiwan's businesses, with more than $100 billion invested in China, want to improve transport links with China, such as direct flights and shipping routes.

Relations with China have worsened under Chen's administration. Beijing, which regards the Taiwan as a renegade province, has said the island may be reunified by force should it move toward independence.

Chen on Jan. 25 named Kaohsiung Mayor Hsieh as his fourth premier since he took office in 2000, betting the popular leader of the island's second-largest city will help the government win support.

The announcement came after Premier Yu Shyi-kun and the rest of Taiwan's Executive Yuan, or cabinet, resigned Jan. 24, as is the tradition ahead of a new parliament due to convene Feb. 1. Taiwan's opposition parties won 114 of 225 parliamentary seats in December's legislative elections.

To contact the reporter on this story: James Peng in Taipei at jpeng7@bloomberg.net

Last Updated: February 17, 2005 21:33 EST