According to reports, the move will pave the way for a potential wave of Chinese investment in the Gambia – China of course claims sovereignty over Taipei and does not maintain diplomatic relations with nations that recognise Taiwan.
Gambia was one of a few African countries, along with Burkina Faso and Swaziland, to recognise a self-ruled Taiwan.
"This decision has been taken in our strategic national interest," Gambia said in a statement on Thursday.
Taipei expressed shock at the announcement.
"The Taiwan government expresses shock and regret toward this decision," Deputy Foreign Minister Simon Ko told reporters on Friday.
Gambia's president Yahya Jammeh's goal is to transform the country into a trading, export-oriented agricultural and manufacturing nation, thriving on free market policies and a vibrant private sector.
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