BEIJING/MANAGUA (REUTERS) - China and Nicaragua re-established diplomatic ties on Friday (Dec 10) after the country broke relations with Taiwan, boosting Beijing in a part of the world long considered the United States' backyard and and angering Washington.

China's Foreign Ministry, announcing the decision after meetings with Nicaragua's finance minister and two of President Daniel Ortega's sons in the northern Chinese city of Tianjin, said the country had made the right decision.

"This is the correct choice that conforms to the general trend and people's aspirations," it said.

Nations that stay Taiwan's allies do so because of money from the island and pressure from the United States, a senior Chinese diplomat said on Friday.

Mr Wang Yi, China's state councillor and foreign minister, made the comment to media after a video meeting with Mr Denis Moncada Colindres, the foreign minister of Nicaragua.

The break with Taiwan shrinks the island's dwindling pool of international allies and is a blow to the United States.

It follows months of worsening ties between Mr Ortega and Washington, and came on the day the US State Department said it had slapped sanctions on Nestor Moncada Lau, a national security adviser to Mr Ortega, alleging he operates an import and customs fraud scheme to enrich members of Mr Ortega's government.

The US State Department said Nicaragua's decision did not reflect the will of the Nicaraguan people because its government was not freely elected.

"We do know, however, that this deprives Nicaragua's people of a steadfast partner in its democratic and economic growth," spokesman Ned Price said in a statement.

"We encourage all countries that value democratic institutions, transparency, the rule of law, and promoting economic prosperity for their citizens to expand engagement with Taiwan."

The severing of ties was lambasted by Taiwan, with its foreign ministry expressing "pain and regret", saying that Mr Ortega had disregarded the friendship between the peoples of Taiwan and Nicaragua.

Taiwan President Tsai Ing-wen said they would not bow to pressure or change their determination to uphold democracy and freedom and "march towards the world".

"The more successful Taiwan's democracy is, the stronger the international support, and the greater the pressure from the authoritarian camp," she said in Taipei.

Taiwan Premier Su Tseng-chang said China was doing all it could to isolate Taiwan, but said it would not succeed.

"We also see that many countries with the same values of democracy and freedom are paying more and more attention to Taiwan and supporting Taiwan," he told reporters.

A senior Taiwan official familiar with the matter told Reuters the timing was "provocative", coming during the Biden administration's Summit for Democracy, which Taiwan is attending, and a week before four referendums on the island, though they are on domestic issues like energy and pork imports.

At the now-defunct Nicaraguan embassy in Taipei, in a building in the leafy suburb of Tianmu, staff said the former ambassador was not in.

Nicaragua's flag outside had been removed by the time a Reuters reporter arrived mid-morning.

Mr Ortega first cut ties with Taiwan in 1985, but they were re-established with the island in 1990 under then-Nicaraguan President Violeta Barrios de Chamorro.

One Taiwan-based diplomatic source, familiar with the region, said the move was not a surprise given Washington's lack of leverage with Mr Ortega due to the sanctions, and that looking to China for aid and support was a natural course of action.

"It appears that Ortega had had enough," the source told Reuters, speaking on condition of anonymity.

Attention will now turn to another Taiwan friend, Honduras.

Aides for the incoming president Xiomara Castro have said she would not establish ties with China, backtracking from Castro's earlier comments that she was open to starting formal relations with Beijing.

A second Taiwan-based diplomatic source told Reuters it was still a case of "watch this space" whether Honduras would ultimately go with Beijing.

China views Taiwan has a renegade province to be reunified, by force, if necessary, and has stepped up pressure to win away Taiwan's remaining allies, especially in Central America and the Caribbean, with El Salvador and the Dominican Republic going over to Beijing in 2018, and Panama the year before.

Before Nicaragua, Taiwan lost two allies in quick succession in September of 2019, when the Solomon Islands and Kiribati went over to Beijing.