What does the One-China Policy really mean?

The One-China policy is the view that there is only one sovereign state called “China,” despite the existence of two governments claiming to be “China.” For governments abroad, this means that to pursue diplomatic relations with the People’s Republic of China (PRC), they must break off official ties with the Republic of China (ROC), or Taiwan. This is different from the One-China principle, which believes that Taiwan is an inalienable part of mainland China to be reunified one day.

While Beijing obviously benefits from the policy, Taiwan has been cast into diplomatic isolation in the international community. And Beijing maintains that Taiwan must be reunited with the mainland, by force if necessary. Many Taiwanese, meanwhile, want to be separate from the mainland forever but are fearful of provocation.

Governments are choosing their ally as they cannot recognise both Beijing and Taipei, and in June earlier this year, Panama announced that it was breaking ties with Taiwan in the effort to establish full diplomatic relations with China. China is the second largest user of the Panama Canal, and so this decision comes as no surprise. China has previously expressed interest in developing land around the Panama Canal, in line with its Belt and Road Initiative which focuses on infrastructure investment around the world. In the last three years, China has forged ahead in areas of construction materials, railways and highways, automobiles, real estate, power, iron and steel.

When Panama’s President Juan Carlos Varela left for China last month to foster links between the two countries, it was on the back of his statement, “I believe that safeguarding the ‘one China’ principle is one of the decisions that will bring benefits to the people I serve.” In response, China’s foreign ministry released a statement saying that “the Chinese government and its people highly appreciate and warmly welcome” the move by Panama.

President Varela’s visit to China coincided with the opening of the newly established Panama embassy in Beijing, a clear nod of support to the One-China Policy. The weeklong visit also saw President Varela and President Xi Jinping, “witness the adoption of some 20 documents, including 19 agreements and a joint declaration,” which “lay the foundations for this new stage and pose a new diplomatic, economic, commercial and tourist panorama for Panama.”

According to a press release from the Panama President’s office, China’s flag carrier airline Air China will begin direct flights to Panama from March 2018 – the first direct flight to Panama by one of the main Chinese airlines.

Regarding economic and commercial matters, there has been formalisation of a policy to promote investments, the financing of development and infrastructure projects, along with the establishment of the bases and conditions to facilitate and promote Panamanian exports to China.

Tourism “will be revitalised with the inclusion of the country as an approved tourist destination,” encouraged “by the relaxation of visas for Chinese citizens.”

Also announced was an agreement on maritime cooperation while the two countries “have agreed to carry out a pre-feasibility study for a rail transport system that links the provinces of Panama and Chiriquí, which will be one of the priority areas of cooperation between both countries.”

President Varela’s trip signals that Chinese companies will be looking to further extend their investments deep into Latin America. China is already now the biggest trading partner for the major economies of Brazil, Chile and Peru. For the five-year period between 2015 and 2019, President Xi Jinping has set ambitious goals of $500 billion in trade and $250 billion in direct investment for the Latin American and Caribbean region.

While these investments do seem plausible, more significantly, an important message about China’s growing importance has been sent to the world.