Panama's Vice President and Foreign Minister Isabel de Saint Malo (L) and Chinese Foreign Minister Wang Yi drink a toast after signing a joint communique on establishing diplomatic relations. Pics/AFPPanama's Vice President and Foreign Minister Isabel de Saint Malo (L) and Chinese Foreign Minister Wang Yi drink a toast after signing a joint communique on establishing diplomatic relations. Pics/AFP

In a diplomatic coup for China, Panama yesterday 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. Chinese Foreign Minister Wang Yi met with Isabel Saint Malo de Alvarado, Panama's vice president and foreign minister. 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. Taiwan expressed "anger and regret" over the "very unfriendly" diplomatic turn by Panama that "yielded to economic interests by the Beijing authorities".

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.