Officials from Panama and China are meeting in the opening round of talks to reach a free-trade agreement, one year after the two countries established diplomatic relations. The talks started on Monday in Panama City and are expected to last until Friday. Panama’s commerce minister has said his country hopes to become the point of entry for Chinese investments and products for the region. Augusto Arosemena said that would be a fundamental part of the talks. China is the second-largest user of the Panama Canal after the United States. Panama dropped relations with Taiwan and established relations with Beijing in June last year. Panamanian President Juan Carlos Varela said in November his country’s decision to shift diplomatic ties from Taipei to Beijing could be a model for other countries but would not affect its relations with Washington. Panama establishes diplomatic ties with Beijing in blow to Taiwan He also said Panama’s decision to ditch ties with Taiwan had nothing to do with “chequebook diplomacy”. Beijing and Taiwan had engaged in a diplomatic truce between 2008 and early 2016 under the leadership of Taiwan’s former president Ma Ying-jeou, from the mainland-friendly party Kuomintang. Watch: ‘One China’ explained Diplomatic observers noted that the timing of Panama’s decision was likely to have been decided by Beijing. And they said this demonstrated yet again that mainland leaders under President Xi Jinping wanted to inflict maximum political cost on the independence-leaning government in Taiwan under President Tsai Ing-wen, by suffocating the self-ruling island’s international space through aggressive diplomacy. Panama’s ditching of Taiwan is ‘latest sign that Beijing means business’ The “one China” policy is a cross-strait understanding that there is only one China but Beijing and Taipei can each have their own understanding of what one China is. For Beijing, it means there is only one sovereign state called China, and other countries must break with self-ruled Taipei to have full diplomatic ties with Beijing. Beijing hopes that diplomatic isolation will eat away at Tsai’s political support and push voters back to the opposition Kuomintang, which favours better relations with Beijing.