TAIPEI, Taiwan (CNN) -- Taiwan set the scene for a new diplomatic showdown with China Wednesday when it established formal ties with Macedonia.

Macedonia, which won independence from the former Yugoslavia republic in 1991, already has ties with China and the new agreement is likely to draw an angry response from Beijing.

The victory to Taiwan in the on-going diplomatic tug-of-war between Beijing and Taipei comes three months after a similar incident when the South Pacific nation of the Marshall Islands recognized the two governments at the same time.

Beijing intervened and forced the Marshall Islands to abandon its ties with Taiwan.

Taiwan's foreign minister Jason Hu signed a communiquŽ with his Macedonian counterpart, Alexandar Dimitrov, at an official signing ceremony.

"The Republic of China government and the Republic of Macedonia, based on the principles of equality and reciprocity, decide to establish formal diplomatic relations on January 27, 1999," Hu told a news conference.

Hu said talks between the sides had been conducted for some time, but "no more than a year."

He stopped short of saying what financial or economic aid Taiwan had promised Macedonia.

Smaller nations have traditionally been wooed by China and Taiwan with financial incentives.

The Nationalist-led Republic of China, which has clung to sovereignty on Taiwan since losing the mainland to communist forces in 1949, has steadily lost international ground to Beijing's People's Republic of China, which squeezes Taiwan by denying diplomatic ties to any country that recognizes the island.

Macedonia, a newly established republic with a population of two million, set up diplomatic ties with Beijing in 1993.

Macedonian foreign minister Dimitrov said his country would like to maintain ties with both Beijing and Taipei.

"We are ready to continue cooperation and relations with this country (China) and we will accept any possible solution from that side," Dimitrov said of ties with mainland China.

He said Macedonia decided to establish formal ties with Taiwan because it hoped to learn from the island on how to achieve economic prosperity.

"We know that the Republic of China is some kind of a miracle in this part of the region. We want the Republic of Macedonia to be like (Taiwan)... in southeastern Europe," Dimitrov said.

He said Macedonia, a U.N. member since 1993, was willing to support Taiwan joining other international organizations.

The addition of Macedonia brings the total number of states that recognize diplomatically isolated Taiwan to 28, mostly poor Latin American and African nations.

In recent decades, diplomatic tussles between Taiwan and China have intensified and in 1998 alone, Beijing wooed away four of Taipei's allies -- South Africa, the Central African Republic, Guinea-Bissau and the tiny Pacific kingdom of Tonga.

Before Macedonia, Taiwan had only one ally in Europe, the Vatican.

The Associated Press and Reuters contributed to this report.