The number of staff in Taiwan's representative office in Hong Kong has dwindled as the territory has stopped issuing visas, to those who remain due to expire by the end of November.
Tensions have grown so severe that Taipei has begun making contingency plans for a situation without representation in Hong Kong, two senior Taiwanese government officials said.
The breakdown in relations follows rising military tensions between Taiwan and China and a crackdown by Beijing on pro-democracy groups in Hong Kong that has led some activists in the territory to seek refuge in Taipei.
China claims Taiwan as part of its territory and has threatened to annex it if the island fails to submit to its control indefinitely.
Analysts said that cutting official channels would undermine Hong Kong's traditional role as a conduit for business and financial exchanges between Taiwan and China. Despite the dispute with Beijing over sovereignty, Taiwanese companies are among the largest foreign investors, employers and exporters in mainland China.
Military tensions between China and Taiwan have escalated, but investment and trade across the Taiwan Strait remains important to both countries.
A significant part of trade across the Taiwan Strait trade goes through Hong Kong, and many Taiwanese investors in China also use Hong Kong for financial, taxation and legal purposes. Last year, Taiwan was Hong Kong's second-largest trading partner, while Hong Kong was Taiwan's fifth-largest, with HK$504 billion (US$65 billion) in total bilateral trade.