It comes just days after Taiwan elected a new president and accused China of attempting to suppress its diplomatic space.

China claims Taiwan as its own territory with no right to state-to-state ties, a position Taiwan strongly disputes.

For years, the two have traded accusations of using "dollar diplomacy" as they compete for diplomatic recognition.

A senior Taiwan official briefed on the matter said Beijing is offering Nauru $100 million a year.

A Nauru government spokesperson declined to comment.

Taiwan's deputy foreign minster, Tien Chung-Kwang said the "ambush-like" move came suddenly.

He accused China of seeking revenge on Taiwan for holding democratic elections.

"In order to maintain our sovereignty and dignity, we have decided from this very day to end diplomatic relations with Nauru, halt all bilateral plans for cooperation, withdraw the embassy and repatriate technical personnel, and will demand for Nauru to shut its embassy in Taiwan."

The government of the tiny Pacific Island nation of Nauru, with a population of 12,500, said the decision was "in the best interests" of the country and its people.

It uses Australian currency and generates revenue from fishing licenses and hosting a regional processing center for refugees for the Australian government.

China confirmed the renewal of relations with Nauru, which previously recognized it between 2002-2005.

China's foreign ministry did not directly answer a question on how much money it had offered.

Taiwan's president elect is Lai Ching-te, who was repeatedly criticized by China before the poll as a dangerous separatist.

He won the election for the ruling Democratic Progressive Party (DPP) and will take office on May 20.

Taiwan security officials told Reuters before Saturday's election that China was likely to continue to whittle away at the countries that maintain formal diplomatic ties with Taipei.

Its 12 remaining diplomatic allies include the Vatican, Guatemala and Paraguay, plus Palau, Tuvalu and the Marshall Islands in the Pacific.