Beijing has protested about the possibility of Washington allowing Taipei's US office to be renamed, and warned the United States not to challenge the one-China principle.
Washington is considering a request from Taipei to change the name of its mission in the US capital from Taipei Economic and Cultural Representative Office (Tecro) to Taiwan Representative Office, the Financial Times reported, citing multiple people briefed on internal US discussions.
A final decision had not been made, and would require President Joe Biden to sign an executive order, according to Saturday's report.
Biden and Chinese counterpart Xi Jinping on Friday held their second telephone call of the former's presidency, during which Biden said "the US has never intended to change the one-China policy", according to Beijing's statement. A statement by the US government made no mention of the issue.
Beijing views self-ruled Taiwan as a breakaway province, to be brought into its fold by force if necessary.
Observers said Beijing would view a name change as breaking the one-China principle and fear a domino effect in other countries.
They said the US had been testing the water over Taiwan - the most sensitive issue as the two powers compete on almost every front, including trade, technology, human rights and the South China Sea.
Foreign ministry spokesman Zhao Lijian said on Monday that China had "lodged solemn representations" with the US and urged it to abide by the one-China principle and the three US-China communiques - joint statements in 1972, 1979 and 1982 that included the US stating its intention to gradually decrease arms sales to the island.
Zhao said Washington should "stop any form of official exchanges between the US and Taiwan to improve substantive relations", including by changing the name of Tecro.
The office was established in 1979 - initially named the Coordination Council for North American Affairs in Washington - to serve as a de facto embassy for Taipei after Washington switched its official diplomatic recognition to the Beijing government.
Beijing has warned countries against having official contact with the island or allowing it to use its official title of "Republic of China", or "Taiwan", in their exchanges.
China recalled its ambassador to Lithuania after the European nation in July allowed the island to open a de facto embassy using the name "Taiwan" - the first country with formal diplomatic ties with Beijing to do so.
Beijing has ramped up pressure on Taiwan in recent months, sending warplanes to the island's air defense identification zone almost daily and expressing anger over US arms sales to Taipei.
The island's government has declined to comment on the possibility of the name change. "It has long been our goal and effort to strengthen and upgrade our relations with the US in all areas," the Taiwanese foreign ministry said on Monday, adding that the island would continue to do so pragmatically and gradually.
Taiwan's main opposition party the Kuomintang has urged the government of President Tsai Ing-wen against any misjudgments over the potential name change, saying the office title was not the most pressing issue between the US and the island.
"It is more important to ask the US to promptly send the (Moderna) vaccine doses we have ordered," KMT chairman Johnny Chiang said.
Liu Shih-fang, the caucus leader of the ruling Democratic Progressive Party (DPP) in the legislature, said changing the office title from "Taipei" to "Taiwan" had nothing to do with "interfering in China's internal affairs" but was simply a more accurate way to refer to the island.
Ni Feng, director of the Institute of American Studies under the Chinese Academy of Social Sciences, said a name change would trigger a "strong reaction" from Beijing and increase friction with the US.
"A change of name would be a major event, meaning the US would be taking a significant step to weaken the one-China policy, leaving only a vague gesture," Ni said, adding that the US was using Taiwan as a pawn in its strategy towards China, to test Beijing's reaction.
Zhu Songling, a Taiwan affairs expert at Beijing Union University, said Washington's tactic was to test the water, "which we are very familiar with", and Beijing's biggest concern was a possible domino effect.
"Recalling our ambassador to the US, like with Lithuania, cannot be ruled out," Zhu said.
Shi Yinhong, an international relations expert at Renmin University, said Biden had been increasing support for the DPP since entering office in January, but it was unclear whether he would approve the renaming given the political pressure on him domestically over the withdrawal of troops from Afghanistan.
Additional reporting by Lawrence Chung and Catherine Wong
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