China considers Taiwan a part of its territory, and opposes other countries' official exchanges with the self-ruled island as well as its participation in international organisations.
On Monday, the Central American Parliament (Parlacen) -- a regional body with six member states -- passed a proposal by Nicaragua to remove Taiwan as a permanent observer and replace it with China.
"The dictatorship of Daniel Ortega in Nicaragua is willing to become a pawn of China... to manipulate the fallacy of the so-called 'one-China principle' and seize our rights in the Parlacen," Taiwan's foreign ministry said in a statement Tuesday.
The Parlacen decision marks Taiwan's latest diplomatic setback after Honduras severed official relations with the island to recognise China in March.
Taipei's removal "is proof of the expansion of authoritarianism in Latin America," Taiwan foreign ministry spokesman Jeff Liu told reporters.
"China and Nicaragua are notorious authoritarian countries. ... It is an attack not only on Taiwan but also on the global democratic countries' camp."
The ministry said it would "withdraw" from Parlacen to protect Taiwan's "sovereignty and dignity".
Liu said the Parlacen removal will not affect Taiwan's participation in two other regional organisations: the Central American Bank for Economic Integration and the Central American Integration System.
Since Taiwanese President Tsai Ing-wen came to power in 2016, China has ramped up military pressure and poached nine of Taipei's diplomatic allies -- including Nicaragua, which cut official ties in 2021.
Within Parlacen, Guatemala is the only member that still recognises Taiwan.
Liu said Taipei's relations with Guatemala "are as stable as ever."
The Parlacen removal came days after Taiwanese Vice President Lai Ching-te returned from a visit to Paraguay, which included two US stopovers that angered Beijing.
China staged military drills on Saturday around the island, a day after Lai's return to Taipei, and on Monday banned mango imports from Taiwan.
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