On Saturday, a new Catholic bishop was ordained in a government-backed church in China without the Pope's approval. Gwao Gin-Ch-aye was ordained in Chengde, north-east of Beijing.
Some bishops loyal to the Pope were allegedly forced to attend what the Vatican calls an illegal ceremony.
Beijing broke ties with the Vatican in 1951 after the Communists took power in China.
It set two conditions for re-establishing relations. Firstly, that the Vatican does not interfere in China's religious matters. And secondly, that it respects Beijing's One-China policy and breaks ties with Taiwan.
Worship is allowed only in state-controlled churches, although millions belong to unofficial congregations loyal to the Pope.
So what has motivated China's defiant move? How will this impact ties with the Vatican? And what is the state of religious freedom in China?
Inside Story discusses with guests: Gerard O'Connell, the Vatican correspondent for the Union of Catholic Asian News; Andrew Leung, a China affairs analyst; and Jonathan Mirsky, a former Far East editor for British newspaper The Times.
This episode of Inside Story aired on Sunday, November 21, 2010.