Panama has severed long-standing diplomatic ties with Taiwan and established relations with China, noting that there was "only one China" and considered Taiwan part of it, BBC reported.

Recognition of Taiwan as a part of China is an indispensable condition for establishment of diplomatic relations with China.

Now only 20 countries have diplomatic relations with Taiwan. 

In recent years China has intensified its economic investment into the Central American country - home of the economically vital Panama Canal.