News

In a deal that could have far-ranging implications for Panama’s economy, the government officially announced diplomatic ties with China this week.

In making the move, Panama severed its formal relationship with Taiwan, which has been source of contention with the Chinese government for years. In a joint statement, the Panama government recognized “that there is only one China in the world” and the government of the People’s Republic of China is “the only legitimate government representing all China, and Taiwan is an inalienable part of the Chinese territory.”

The statement also said China and Panama would immediately establish an ambassador-level relationship. The two countries would start cooperating on trade, investment, maritime matters and tourism, Chinese Foreign Minister Wang Yi said Tuesday.

“I’m convinced that this is the correct path for our country,” President Juan Carlos Varela said in a televised address on Monday.

The new relationship can have an impact on all areas of Panama’s economy, including real estate. China is known as a long-term investor, establishing long ties with its trading partners. Chinese have also been investing heavily in property around the world, particularly in areas where they have strong business and political ties.

China is already the second most important customer of the Panama Canal, and Chinese companies have been active recently in many areas of the business community, including bidding to build infrastructure projects.

The move was bad news for Taiwan, which is only formally recognized by about 20 countries.