China has warmly welcomed the Vatican's new proposals to reconcile differences between the two, declaring the development as "a step forward".
The Vatican recently called for past misunderstandings to be forgotten, following a two-day meeting in Rome to review the Roman Catholic Church's strategy towards China.
Tension has been at a height between the Vatican and China since the 1950's when a fierce argument broke out over the ordination of bishops, as well as the issue of Taiwan.
The disagreement has driven a firm wedge between China's state-sanctioned "authorised churches", which have up to 4 million followers, and the "illegal underground churches", millions of which remain loyal to the Roman Catholic headquarters in Rome.
The Chinese Patriotic Catholic Association (CPCA) welcomed the outcome of the meeting, and in particular heaped praise on Pope Benedict's decision to write a letter to China's 10 million Catholics.
The CPCA vice-chairman Liu Bainian said: "This is beneficial for China-Vatican relations. It is a step forward but we still have to see the concrete actions," according to the BBC.
Despite the breakthrough, tensions over the Vatican's recognition of Taiwan and China's ordination of bishops without the Holy See's blessing - the core issues at the centre of the long-running dispute - are thought to remain.
The Vatican has also been very outspoken in criticising China's alleged human rights breaches.
Liu said the Vatican statement acknowledged the growth of the Chinese church and that this was proof the Holy See recognised that China enjoyed freedom of religious belief, reported the BBC.
