U.S. President-elect Donald Trump looks towards the media as he arrives at a costume party at the home of hedge fund billionaire and campaign donor Robert Mercer in Head of the Harbor, New York, U.S., December 3, 2016.REUTERS/Mark Kauzlarich

China pulled off a major diplomatic victory as President Xi Jinping got US President Donald Trump to endorse the 'One China' principle. "President Trump agreed, at the request of President Xi, to honor our 'one China' policy," a White House statement issued after the two leaders spoke over phone, said.

The 'One China' policy is the keystone of China's diplomatic relations with the rest of the world as it underscores that Beijing, not Taiwan, represents the single Chinese government. Trump upset the long standing principle when he accepted a phone call from Taiwan President Tsai Ing-wen following his election as the US president.

Angered China protested the move but Trump defended the action and questioned if Beijing consulted the US over its currency moves. China retorted saying the One China principle was not a negotiable matter.

Trump's phone call with Xi was crucial as China had concerns about the outcome. However, White House said Trump acknowledged the importance of cordial ties with China. "Representatives of the United States and China will engage in discussions and negotiations on various issues of mutual interest," the statement added.

In return, Xi said in a statement China and the US are 'cooperative partners'. "The development of China and the United States absolutely can complement each other and advance together. Both sides absolutely can become very good cooperative partners," Xi said.

No US president or president-elect has held official talks with a Taiwanese leader since Washington adopted the One-China policy in 1979. The Chinese government reacted with a terse but clear statement expressing displeasure over Trump's telephone conversation with Tsai.

Soon the spat turned ugly with Trump levelling currency manipulation charges against China and the official Chinese media launching tirades against Trump.

"Did China ask us if it was OK to devalue their currency (making it hard for our companies to compete), heavily tax our products going into their country (the U.S. doesn't tax them) or to build a massive military complex in the middle of the South China Sea? I don't think so!" Trump wrote on Twitter.