China signed an agreement to restore diplomatic relations with Sao Tome and Principe Monday, just days after the small African nation announced it had cut ties with Taiwan.

The move comes amid heightened tensions between Beijing and the independence-leaning government of the self-ruled island, which Chinese leaders view as a "renegade province."

Chinese foreign minister Wang Yi and his counterpart Urbino Botelho signed a document formalising their new relationship at the Diaoyutai State Guest House.

"We need to acknowledge that China is playing an increasingly important role internationally," Botelho said, adding "we want to make good on our past mistakes."

Speaking to reporters after the ceremony, Wang said China "highly appreciated" Sao Tome's choice.

"We are happy to see that Sao Tome and Principe has actively conformed to the tide of history, looking at the facts and long-term interests of both countries' peoples," he said.

Last Wednesday, Beijing issued a statement welcoming Sao Tome's decision to split with Taiwan, which it has recognised since 1997.

The move earned a stinging rebuke from Taiwan, which said it condemned the "reckless and unfriendly decision and action by the Sao Tome government."

Taiwanese foreign minister David Lee said Sao Tome had demanded an "astronomical" amount of financial assistance to continue its relations with Taipei, which was refused.

Sao Tome's decision leaves Taiwan with formal diplomatic ties to only 21 states, including just two in Africa, and the Vatican -- its highest profile supporter.

For years, China and Taiwan were locked in a bitter diplomatic tug-of-war, luring away each other's allies with generous financial packages in so-called "chequebook diplomacy".

Diplomatic tussles between the two had eased under Taiwan's previous Beijing-friendly government, but two months after President Tsai Ing-wen's China-sceptic Democratic Progressive Party (DPP) won landslide elections in March, China recognised Taiwan's former ally Gambia.

Cross-strait tensions have been further exacerbated by a highly unusual call from President Tsai to congratulate US president-elect Donald Trump, who has questioned Washington's policy towards the island, including its decision to not formally recognise its government.

Tsai is preparing for a trip next month to meet diplomatic allies in Latin America, and she is expected to pass through the United States, which may irk China.