Panama cuts diplomatic ties with Taiwan in favour of Beijing

Panama and China announced on Tuesday they were establishing diplomatic relations, as the Central American nation became the latest to dump Taiwan for closer ties with the world's second-largest economy.

The two countries issued a joint statement saying: "In light of the interests and wishes of both peoples, the Republic of Panama and People's Republic of China have decided to grant each other, from the date of this document's signing, mutual recognition, establishment of diplomatic ties at the ambassadorial level.

Panamanian President Juan Carlos Varela said in a televised address on Monday that Panama was upgrading its commercial ties with China and establishing full diplomatic links with the second most important customer of its key shipping canal.

"I'm convinced that this is the correct path for our country," Varela said, adding that the government recognised there was "only one China" and that it considers Taiwan part of it.

Taiwan's government said it was sorry and angry over Panama's decision, and said it would not compete with China in what it described as a "diplomatic money game".

"Our government expresses serious objections and strong condemnation in response to China enticing Panama to cut ties with us, confining our international space and offending the people of Taiwan," David Lee, Taiwan's minister of foreign affairs, told a briefing in Taipei.

Taiwan would immediately end cooperation with and assistance for Panama, and evacuate embassy and technical personnel "in order to safeguard our national sovereignty and dignity", Lee said.

The announcement comes after Beijing began construction last week of a container port, with natural gas facilities, in Panama's northern province of Colon.

Panama had long stressed it had diplomatic ties with Taipei and commercial ones with Beijing.

Chinese ships, after those from the United States, are the number two users of the Panama Canal, the Central American country's main source of budget revenue.

Taiwan is recognised by around 20 countries worldwide and its status is one of the most politically sensitive issues for Chinese leaders who pressure trade partners to accept its "one China" principle.

Panama is the second country to switch its recognition to Beijing since Tsai took office last year, following a similar move by Sao Tome and Principe in December.