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Costa Rica has established diplomatic ties with China, ending over half a century of trade with Taiwan.

The Latin American country issued a joint communiqué with China acknowledging its territorial claim over Taiwan, with which it had had diplomatic ties, earlier today.

China and Taiwan became separated after the Chinese communist revolution of 1949, with Taiwan insisting on its right to independence from mainland China.

In the 1950s the struggle between the two centred on disputes over smaller islands off the Chinese coast, but now China's economic clout has created a less tangible but more serious threat to the increasingly isolated country.

"The Costa Rican government recognizes that there is only one China in the world, and the government of the People's Republic of China is the sole legitimate government representing the whole of China," the Xinhua news agency quoted the communique as saying.

"Taiwan is an inalienable part of the Chinese territory," it added.

Costa Rican president Oscar Arias said his country's desire to strengthen commercial ties and attract investment meant tying itself to the emerging Chinese economy was a necessity.

Taiwan has responded by severing its relations with Costa Rica.

"China may suppress Taiwan internationally but it cannot suppress the Taiwanese people's determination to uphold national dignity ... We strongly condemn China's move," the AFP news agency quoted Taiwanese foreign minister James Huang as saying.