The Dominican Republic's decision on Monday to sever ties with Taiwan and establish diplomatic relations with China brings economic benefits for the Caribbean country and further isolation for its former Asian partner.

But it also indicates that China is gaining leverage in the US's backyard in its longstanding dispute with its island neighbor.

Taiwan broke away in 1949, after defeated Nationalist forces fled the mainland. Beijing still considers the island part of its territory, and the two countries have competed for diplomatic recognition around the world.

That competition cooled in the late 2000s, when they entered a kind of detente, under which they "wouldn't poach each other's diplomatic allies," Jorge Guajardo, Mexico's ambassador to China from 2007 to 2013, told Business Insider on Tuesday.

Chinese President Xi Jinping, who took office in 2013, has expressed desire for reunification, and the erosion of that rapprochement quickened with Taiwan's 2016 election of President Tsai Ing-wen, who has said she wants peace and to maintain the status quo, though Beijing suspects she wants to push for formal independence.

The tipping point, Guajardo said, came with the December 2016 phone call between Tsai and then President-elect Donald Trump.

That created a situation "in which China all of sudden faced a threat that Taiwan would get recognition that it didn't have before," Guajardo told Business Insider. China's response was, "OK, the gloves are off, and we're going after every single ally."

The US does not have official relations with Taiwan and currently recognizes Beijing "as the sole legal government of China," though it maintains contact with the government in Taipei through the American Institute in Taiwan.

Weeks after Tsai's phone call with Trump, China said the small West African country of São Tome and Principe had switched its diplomatic allegiance from Taipei to Beijing, reducing the number of countries recognizing Taiwan to 21.

In June 2017, Panama switched sides and recognized China — a move promoted by business interests in both countries.

The Dominican Republic's decision brings Taiwan down to diplomatic recognition by 19 countries, 10 of which are in Latin America, and underscores China's increasing leverage in its competition with Taiwan in Latin America — the "irresistible trend" that Beijing says Taiwan's remaining allies should follow.

"Over the last two years, China's interest in and efforts in Latin America increased considerably. They're now the number-one trading partner for a number of countries" in the region, according to Mark Feierstein, a senior adviser at Albright Stonebridge Group who was senior director for Western Hemisphere Affairs on the National Security Council during the Obama administration.

These partnerships secure resources from abroad to feed domestic consumption in China and open new markets for Chinese goods — but they also augment Beijing's clout in international forums and in its dispute with Taiwan.

"They're trying to get resources and raw materials," Feierstein told Business Insider. "This battle with Taiwan is ongoing for a long time, and China's just better positioned now than they used to be."

'A cost that Taiwan could not match'

Taiwan and China's late-2000s detente led to a pause in their "checkbook diplomacy," where they both offered generous aid in exchange for diplomatic recognition, but Chinese firms, encouraged by Beijing, have continued to expand investment, projects, and trade in the Caribbean over the past decade.

Latin America has also become a larger source of natural resources for the voracious Chinese economy, growing its share of China's crude-oil imports from about 2% in 2005 to nearly 13% in 2016.

"Both countries have been willing to throw around resources in order to gain diplomatic recognition, but I think it's increasingly been more difficult for Taiwan to compete with China on that front, and as a result we're seeing certain countries flip from Taiwan to China," Feierstein said.

The Dominican Republic's trade with China has grown to $2 billion a year, the second most among Caribbean and Central American countries. A Taiwanese official told Reuters that Beijing offered $3.1 billion in investments and loans to get the Dominican Republic's recognition. "It was a cost that Taiwan could not match," the official said.

"The relative poverty and lack of infrastructure of the Central American isthmus make recognition of China a profitable move for regional leaders seeking financial aid," Sophie Wintgens, a post-doctoral researcher at the Universite libre de Bruxelles, wrote in November. "Historically, governments switching diplomatic relations to China have been rewarded with investment, improved access to the Chinese market, and loans."

China's success with the Dominican Republic may also be an effort to caution the US about trying to use Taiwan to counter Beijing, said Yang Liquan, a Beijing-based expert on Taiwan.

"The Taiwan issue is part of the China-US rivalry, and America has intensified its efforts to use Taiwan as leverage against China," Yang told The South China Morning Post. "While the US only sees Taiwan as a chess piece, China sees Taiwan as part of its core interests that cannot be compromised."

'A play to isolate Taiwan'

In Latin America's biggest economies, like Brazil, China will continue to have big economic interests, Feierstein said, but both he and Guajardo said those interests would take a backseat in Beijing's diplomatic offensive against Taipei.

China's goal in the region is still "strictly to isolate Taiwan," Guajardo said, adding that having broader economic relations "doesn't move the needle" for Beijing.

"When it comes to the smaller Central American countries, smaller Caribbean countries, China doesn't have a huge economic interest there," Feierstein told Business Insider. "That's part of the diplomatic game with Taiwan."

Countries in Central America still have strong ties with the US, which makes it unlikely the region will become a venue for a larger geostrategic competition between Washington and Beijing, Guajardo told Business Insider. China, he said, would look to make "more of a play to isolate Taiwan and weaken the US's hand vis a vis Taiwan."

The Dominican Republic jumping sides, just months after Panama, may spur similar moves by their neighbors, who will likely act in their own self-interests and in response to Trump's seeming withdrawal from Latin America, Feierstein said.

With the potential for expanded business dealings as an incentive, Guajardo said, "it now becomes a race toward not being the last one with Taiwan."

In 2008 and 2009, some of Taipei's largest partners in the region — among them Nicaragua, Paraguay, and Honduras — expressed interest in switching their diplomatic allegiance. But China, amid the detente with Taiwan, declined their overtures, according to cables released by WikiLeaks.

Beijing is not likely to demur should such an opportunity arise again.

"China's going to go wherever they can to flip countries, and clearly they've determined, and they were correct, that there are countries they can flip in Latin America," Feierstein said. "As long as China grows by leaps and bounds and is on the verge of becoming the largest economy in the world, I would think it'd be increasingly difficult for Taiwan, perhaps, to hold on to some of these countries."