The number of countries recognising Taiwan as a state has dwindled in recent years as China's diplomatic influence has strengthened.
Taiwan Foreign Minister Joseph Wu responded with a statement immediately severing diplomatic ties with the Dominican Republic, adding that China's ongoing efforts to isolate Taiwan from the worldwide community would further damage cross-Strait relations.
The decision comes during a time of heightened tensions between China and Taiwan's traditionally independence-leaning Democratic Progressive Party, which rose to power in 2015.
Taipei reacted angrily to the news, which left the island with 19 diplomatic allies around the world - mostly small and poor countries in the Pacific and the Caribbean, with the Dominican Republic being the largest before the latest development.
China has offered many developing countries aid packages. The United States, for example, has a formal diplomatic mission in China but maintains a de facto embassy in Taiwan known as the American Institute of Taiwan.
The Vatican is possibly next on the list, as the Holy See and China edge closer to an accord on the appointment of bishops in China.
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The gift was symbolic - honoring USA troops' sacrifice during a legendary World War I battle and the ongoing alliance with France. The oak comes from the site where the Battle of Belleau Wood raged in northern France in June 1918.
Beijing announced Tuesday morning that the two countries would exchange ambassadors "as soon as practicable".
"We strongly condemn China's objectionable decision to use dollar diplomacy to convert Taiwan's diplomatic allies", the statement read.
Taiwan's foreign minister, Joseph Wu, said Beijing's actions had eroded trust and he blamed financial incentives for ending Taiwan's 77-year alliance with the Dominican Republic.
"The Taiwan Strait is very likely to replace the Korean Peninsula as the hottest flashpoint in the region", National Defense Minister Yen Teh-fa said at a panel.
China's foreign ministry said the move was a political one with no economic pre-conditions, but that now they have established ties, China will "proactively promote mutually beneficial co-operation in all areas".
Mainland China and Taiwan split following a civil war in 1949.
"We've always known things were not looking rosy here", the official said.
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The governments in Beijing and Taipei insist that countries can not recognise both of them.
"This important and correct decision is in full compliance with the fundamental interest of the Dominican Republic and its people", he said, according to a statement from China's Ministry of Foreign Affairs paraphrasing his comments. It was already Tuesday when the new broke in China.
But the Dominican Republic's switch shows that China has the diplomatic means to pressure Taiwan as well, said Ross Feingold, a Taipei-based senior adviser at DC International Advisory, a political risk consultancy.
Espinal said the government informed Taiwan of its move earlier Monday and thanked the Taiwanese for "the cooperation that we have shared for years".
"Today's event will create a stream of diplomatic switching from Taipei in a matter of months, if not in years", Richard W. Hu, a professor of politics at the University of Hong Kong, said in an email. "However, history and the socioeconomic reality force us now to change direction".
As a result, China refuses to have diplomatic relations with nations that deal diplomatically with Taiwan, as that treats the island like an independent country.
Neither Wang, nor Dominican Republic Foreign Minister Miguel Vargas Maldonado, who stood by his side at the Beijing news conference, took questions from reporters. Beijing considers the island a breakaway province and eyes reunification.
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