Hong Kong, China - A Hong Kong cardinal announced the Vatican will set up a permanent commission to handle China affairs, a day after the Holy See said it hoped to restore diplomatic ties with Beijing, according to a report.
"It will be set up because we had a good experience of working together in handling problems related to China," Cardinal Joseph Zen was quoted as saying by the South China Morning Post.
"It will definitely continue in similar fashion," he said after a two-day, high-level meeting with the Vatican to review its China policy.
Details of the new inter-departmental commission have yet to be announced.
In an editorial, the Post hailed the move as a "step forward" in efforts to bring about better relations between both sides, although the Vatican faced a tough task ahead.
"At the heart of the problem is Beijing's assertion of a right to determine what goes on within its national borders," the Post said. "China, like every other nation, jealously guards that right.
"But the grip must be loosened if Catholics are to be able to properly follow their religion," the paper said, adding China could enhance its role on the world stage by doing so, with the 2008 Beijing Olympics approaching.
The Vatican meeting last week brought together key officials and China experts from the Vatican Secretariat of State, as well as Taiwanese Cardinal Paul Shan Kuo-hsi and Macau Bishop Jose Lai Hung-seng.
The Holy See issued a statement afterwards, saying it wished to "overcome misunderstandings of the past" with Beijing, which does not allow Chinese Catholics to recognise papal authority.
It also called for "respectful and constructive dialogue" after months of tensions centring on the right to appoint bishops.
Although Pope Benedict XVI did not attend the meeting, he was broadly informed of the discussions and "has decided to send a letter to Catholics in China", the statement said.
Liu Bainian, vice chairman of the state-run Chinese Catholic Patriotic Association, said he hoped formal ties between the Vatican and Beijing could be established "as soon as possible".
Despite the difficulties the Holy See faces, Sino-Vatican expert Beatrice Leung believed the new committee meant both sides could be in the final rounds of negotiations on normalising relations.
"This is a positive move. I think it is the last step in their negotiation. You can see all the key officials and experts went there for the meeting, which shows the importance of it," she said.
"Now the pope is writing a letter to the Catholics in China, which means the letter would be accepted by the mainland. They wouldn't do so if they knew it would be rejected," she said.
While the Holy See is ready to restore ties, Leung said China, emerging as a major world power, would be forced to face the issue sooner or later.
Tensions have been simmering since Chinese authorities last year went ahead with the ordination of four bishops who did not have the pope's approval.
Zen, who was still in the Vatican, said the Holy See's policy towards Beijing remained the same.
"We are not surrendering and our stance has not changed," he said. "We have stated our basic principles on religious freedom.
"There have already been statements in the past on the illicit ordinations and now is the time to review our policy and plan ahead on what to do," he said.
While Catholicism is allowed in China, a state-sanctioned "patriotic church" with an estimated five million members does not answer to the pope and ordains its own bishops.
A clandestine Church, with some 10 million adherents, tenaciously maintains links with the Vatican.
Diplomatic ties between China and the Vatican have been severed since 1951, two years after Beijing's officially atheist Communist government took power.
Normalisation of ties would require the Vatican to break off ties with Taiwan, which Beijing considers a renegade province.