On Sunday Bishop Vincent Zhan Silu celebrated mass for 500 Catholics and Chinese officials in a church in southern Ningde city to mark his formal appointment as head of the Mindong Diocese.
TV reports showed Zhan holding a gold staff and wearing the white pointed hat used by bishops.
The welcoming ceremony, however, compounded deteriorating relations between the Vatican and China.
Over the past three weeks, the Chinese Catholic Patriotic Association, the state-run administrator of China's Catholic Church, has overseen the ordination of three new bishops, two of which came without papal approval.
The refusal to seek papal approval has angered the Vatican, setting back efforts to improve ties with Beijing.
There has been a threat of excommunication from the Vatican.
Just a few months ago, Catholics hoped that back-channel communications and concessions from the Vatican would end a rift between the Vatican and the Chinese state-run church set up by the Communist government a half century ago.
Pope Benedict has accused China
of a serious violation
Since becoming pope last year, Benedict XVI has sought to improve ties with Beijing in an effort to get closer to millions of Chinese Catholics, but the consecration earlier this month of the two bishops has been seen as a setback to those efforts.
In a strongly worded statement last week, Pope Benedict XVI accused Beijing of a "serious violation of religious liberty" in ordaining the two priests.
A senior official in the state-backed agency that administers Catholic churches, Liu Bainian of the Patriotic Catholic Association, dismissed the criticisms over Zhan, saying the ceremony was planned long ago.
The Vatican declined to comment on Zhan's installation.
Bishop Zhan celebrated mass
Zhan's situation underscores the stakes for Beijing and the Vatican.
The Mindong Diocese, in the southern province of Fujian, has over 60,000 Catholics, but only 10,000 worship in state-authorised churches, according to estimates by the Catholic Church in Hong Kong.
That has led to parallel church structures, one serving the independent or underground Catholics, the other serving the Beijing-approved church.
Appointment not publicised
The larger community of independent Catholics already has a bishop, an elderly cleric, Huang Shoucheng, approved by the Vatican last August, the Hong Kong church official said.
Zhan became the state-approved bishop of Mindong a year ago when his elderly predecessor died.
But the appointment was not publicised, Zhan said, and Sunday's ceremony was arranged before the recent ordinations to mark his formal welcome to the diocese.
Beijing cut diplomatic ties with the Vatican in 1951 - prompting the papal state to switch its diplomatic ties to Taiwan, which China views as a renegade province.