The Vatican might be ready to cut ties with Taiwan in order to establish diplomatic relations with China, a senior Hong Kong bishop has said.
Catholics in Beijing held a mass to remember Pope John Paul
Joseph Zen said the Holy See might change allegiances if Beijing was "willing to grant real freedom to the church in mainland China".
China originally broke ties with the Catholic Church in 1951.
China's estimated 13m Catholics are forced to attend state-controlled churches or worship in secret.
China regards Taiwan as a breakaway province, and the Vatican's continuing acknowledgement of the island has been a sticking point in diplomacy with Beijing.
But hopes for progress were raised on Sunday when China expressed condolences on the death of Pope John Paul II.
Beijing reiterated on Tuesday that it was willing to re-establish diplomatic links with the Vatican, but only if it cut ties with Taiwan and did not use religion to interfere in China's internal affairs.
Bishop Zen, a vocal critic of Beijing's policies, said that he hoped someone could explain to the Chinese government that the Vatican just wanted religious peace.
"It has no political ambitions whatsoever," Bishop Zen said. "The Pope appoints bishops everywhere, and nobody is offended. We hope the Chinese government can understand this."
A senior Vatican diplomat told Reuters on Tuesday that there was no change to its position on China and Taiwan, and said he did not expect any movement until after the election of a successor to the Pope.
Catholics in China are required to look to Beijing, not the Vatican
But analysts say there is little doubt that if the Vatican were to sever ties with Taiwan it would be a major blow to the island - which is now recognised by just 25 nations.
The Vatican is Taiwan's only remaining ally in Europe.
Bishop Zen told Reuters news agency that there was already an understanding that one day the Holy See would have to sever its ties with Taiwan in preference for mainland China.
"It is for the good of Catholics in mainland China. There are so many Catholics in China and if there are no ties with China, they cannot have freedom," he said.
But Taiwan said on Tuesday that its relations with the Vatican would continue as normal, even now Pope John Paul II has died.
A spokesman said there were still huge differences between Beijing and the Vatican, preventing normalised relations.
"As we all know that China is a country short of religious freedom, where religious leaders were arrested, this is an insurmountable barrier," Foreign Ministry spokesman Michel Lu Ching-lung told the AFP news agency.