June 14, 2017
Panama has established diplomatic ties with China and broken with Taiwan in a major victory for Beijing, as it lures away the dwindling number of countries that have formal relations with the self-ruled island.
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.
Taiwan's government said it was sorry and angry over Panama's decision, and 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.
Panama’s reversal may be linked to China’s massive investment in the country; Beijing has spent billions of dollars in the area around the Panama Canal.
China state firms eye land around Panama Canal
Chinese state firms have expressed an interest to develop land around the Panama Canal, the chief executive of the vital trade thoroughfare said, underlining China's outward push into infrastructure via railways and ports around the world.
Read: Consolidating power in the Panama Canal
The Panama Canal Authority will officially open a tender to develop about 1,200 hectares of land - roughly the size of 1,200 football fields - around the waterway by the end of this year into a logistics park, after completing a five-year-long decontamination of the area, Chief Executive Jorge Quijano said.
"We have been talking to people here in China," Quijano told Reuters ahead of a meeting with the canal's advisory board in Shanghai. China Communications Construction Corp, its subsidiary China Harbour Engineering Company and China Railway Group have shown interest in the project, he added.
This comes at a time when China is urging its companies to invest in infrastructure overseas as part of Beijing's "One Belt, One Road" initiative to improve global trade links.
China is deeply suspicious of Taiwan President Tsai Ing-wen, who it thinks wants to push for the island's formal independence, although she says she wants to maintain peace with Beijing.
China and Taiwan have tried to poach each other's allies over the years, often dangling generous aid packages in front of developing nations, although Taipei struggles to compete with an increasingly powerful China.
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, trimming to 20 the number of countries that formally recognise Taiwan.
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