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China has ruled Taiwan for just a few years over the last century. Japan seized control of what was then known as Formosa in 1895; the Chinese civil war severed the relationship between mainland and the island reestablished only in 1945.
Juridically, Beijing has a claim to Taiwan. But native Taiwanese always chafed under mainland rule. Over the last half century they have created an independent nation.
More important, they have created a democratic state and market economy. What sane Taiwan resident would want to submit to rule by the PRC?
Because diplomatic relations among major countries really do matter, the U.S. had little choice but to prefer China, especially in the midst of Cold War, when Beijing was an important counterweight to the Soviet Union. Even now, to recognize Taiwan while daring the PRC to close America's embassy would be a risky game of chicken, especially given China's increasingly important role on the international stage
In contrast, Vatican recognition offers symbolic sanction. The PRC doesn't deserve that kind of approval until it genuinely respects religious liberty.
Of course, explains the PRC State Council, "China is always open to foreign religious organizations and individuals who are friendly to China, respect China's sovereignty and Chinese religions' principle of independence and self-administration." This means that the Catholic Church isn't even supposed to canonize Chinese martyrs without Beijing's approval. What authoritarian state wouldn't welcome that kind of relationship?
Moreover, by recognizing Taiwan the Holy See is offering important support for 23 million people who don't want to be forcibly absorbed by the mainland. Among nations, Taiwan represents the poor and downtrodden whom John Paul II so eloquently championed.
Taipei needs advocates on the international stage. The Papacy is one.
The Vatican's spiritual obligations are far more important than its temporal duties. But its latter role matters in this case by implicitly acknowledging the right of the Taiwanese people to organize their society, free from threats by China. That should not change with the installation of a new Pope.