In a diplomatic coup for China, Panama today cut long-standing diplomatic ties with Taiwan and established relations with Beijing as the cash-rich Communist giant exerted its economic clout to wean away handful of allies of the self-ruled island.
Regarded as big blow for Taiwan, China and Panama signed a joint communique here formally establishing full-fledged diplomatic relations.
They signed the joint communique in which Panama has recognised One China, meaning that Taiwan is part of the Chinese mainland.
Panamanian President Juan Carlos Varela said on Monday that Panama was upgrading its commercial ties with China.
"I'm convinced that this is the correct path for our country," Varela said.
Last June Taiwan's leader Tsai Ing-wen, a strong advocate of Taiwan's independence from China visited Panama, on her first overseas trip as President.
Taiwan's foreign ministry condemned the move, alleging the island nation had demanded a huge amount of financial support.
The move by Panama comes as China began construction of a container port with natural gas facilities in northern province of Colon last week.
Taiwan, which broke away from China in 1949, is coming under immense pressure from China's push with huge funds of Belt and Road Initiative. Panama is the latest country to cut ties with Taiwan.
In December last year, the African island nation of Sao Tome and Principe made a similar move. Now only 20 countries have diplomatic relations with Taiwan.
Taiwan has left with few allies, mostly small countries. They include Belize, El Salvador, Haiti, Nicaragua, St Kitts and Nevis, St Vincent & the Grenadines, the Dominican Republic, Guatemala, Paraguay, Honduras and Saint Lucia In Africa: Burkina Faso and Swaziland, The Holy See, Kiribati, Nauru, the Solomon Islands, Tuvalu, the Marshall Islands and Palau.
Panama did not give any reason for changing its diplomatic allegiance but there has been growing economic co- operation with China in recent years.
China's foreign ministry also released a statement saying that "the Chinese government and its people highly appreciate and warmly welcome" the move by Panama.
The United Nations in 1971 switched diplomatic recognition to Beijing's People's Republic of China (PRC) and most countries have since followed that lead in order not to antagonise the economic giant which is the world's second largest economy.
Chinese companies are developing ports in Panama, and Chinese state firms are said to have expressed interest in developing the land around the Panama Canal once the country opens a tender for it later this year, media reports said.
The Panama Canal is a vital shipping route. As China expands its global trade ambitions with its One Belt One Road infrastructure-building initiative, access to the eastern coasts of both South America and the US is expected to be of growing importance for Beijing, the report said.
(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)