Hi, China Watchers. Today we look at Taiwan’s fragile Vatican ties, unpack Beijing’s suspicions of President Donald Trump’s “Golden Dome” missile defense plan and profile a book that tracks the arc of U.S. engagement with China.

Let’s get to it. — Phelim.

CHINA WATCHER SIGNS OFF: After five years and 300-plus editions, we’ve decided to close down China Watcher. But I’m not going anywhere! With the world’s eyes on Beijing like never before, we’re swapping out our weekly take on all things China and supercharging our coverage to bring you daily news across multiple POLITICO platforms. So look for my breaking and in-depth reporting in Pro subscriber stories, on our home page, and featured throughout POLITICO’s array of newsletters around the globe. Our final edition will be on May 29. I can’t wait for this new chapter — I hope you’ll join me!

POPE LEO’S COLD SHOULDER TO TAIWAN

Pope Leo XIV signaled this week that the Vatican’s formal diplomatic ties with Taiwan won’t stand in the way of the Holy See’s longtime pursuit of closer relations with Beijing.

Taipei lobbied for weeks to get President Lai Ching-te an invitation to Leo’s installation as Pope on Sunday (he was also left off the guest list for Pope Francis’ funeral last month). But in the end, it was former Taiwanese Vice President Chen Chien-jen who attended. While the Vatican and Taipei won’t say if Lai actually got an invitation, the question of whether to invite Taiwanese officials to global events is always a delicate one, given Beijing’s hostility to the island’s officials presence at high profile international gatherings.

Taiwan’s foreign ministry said in a public statement that Lai designated Chen to attend because of his “deep ties with the Holy See,” but the island’s diplomatic outpost declined to comment on whether the Vatican had invited Lai. The Holy See’s embassy in Washington referred POLITICO to the Vatican’s press office. The Vatican’s press office didn’t respond to a request for comment.

“The Holy See has a tricky relationship with Beijing,” said Brent Christensen, former director of the U.S. diplomatic outpost in Taiwan from 2018-2021. “Pope Leo was being cautious.”

Beijing expelled the Vatican’s diplomatic envoy to China in 1951, prompting him to relocate to Taiwan. The Vatican forged official diplomatic relations with Taiwan (under its formal title the Republic of China) in 1966 and has had no formal ties with Beijing since then. The Holy See is Taiwan’s sole formal diplomatic ally in Europe.

But the Vatican has long juggled that role with efforts to woo Beijing. The Vatican’s Secretary of State Angelo Cardinal Sodano stated in 1999 that the Holy See was open to cutting diplomatic ties with Taipei and switching recognition to Beijing.

“China and the Vatican have maintained constructive engagement, conducted useful exchanges, and had extensive communication on international issues in recent years,” said Liu Pengyu, spokesperson for China’s embassy in Washington. Liu declined to comment on whether Beijing had pressured the Holy See to deny Lai an invitation to Leo’s installation, saying that would have to be addressed by the foreign ministry in Beijing.

The Vatican’s diplomatic sweeteners for Beijing have included declining to dispatch an ambassador to the island since 1971. The Holy See also declined to join Taiwan’s 11 other diplomatic allies in their annual effort to get the self-governing island observer status at the annual meeting this week of the World Health Assembly in Geneva on Tuesday.

The Vatican may be betting that such symbolic snubs could pave the way toward an arrangement that allows it more influence with China’s estimated 12 million Catholics.

Pope Francis took a step in that direction in a 2018 agreement (details of which are secret) that requires Beijing to consult with the Vatican on its appointment of new bishops in the country’s state-controlled Catholic Church. Beijing’s confirmation of two new bishops without Vatican approval in the weeks between Pope Francis’ death and Pope Leo’s installation may not have been coincidental.

“That was a warning to the new Pope that Taiwan is as existential to Beijing as the appointment of bishops in China is to the Catholic Church,” said Victor Gaetan, author of a book on Vatican foreign diplomacy.

Pope Leo has not commented on whether he’ll consider switching the Vatican’s diplomatic relations from Taiwan to China. But his papacy creates the possibility of a rethink of the Holy See’s awkward diplomatic balancing act between Taipei and Beijing.

“This could be a moment for the Vatican to make the final step to fully establish diplomatic relations with Beijing,” Gaetan said.

In Taiwan there are hopes that Beijing’s human rights record — particularly its repression of religious freedom — makes Vatican recognition of China unlikely anytime soon.

“The Vatican sees values and beliefs as important elements of its standing,” said Alexander Huang, director of international affairs for Taiwan’s opposition KMT party. “True communists don’t believe in God.”

TRANSLATING WASHINGTON

— STATE DEPARTMENT PRAISES CHAGOS ISLANDS DEAL: The State Department says an agreement that will hand sovereignty of the Indian Ocean’s Chagos Islands from the United Kingdom to Mauritius today will help protect the region from malign Chinese influence. The deal allows the U.K. and the U.S. to maintain control of their secretive joint base on the island of Diego Garcia.

“The base establishes a very significant presence for the United States and for the U.K. in this region and prevents China from encroaching on this area,” said a senior State Department official who briefed reporters ahead of the handover on condition of anonymity.

Republican lawmakers warned last year that surrendering the islands to Mauritian control would threaten national security. State has no such concerns.

“Chinese influence with Mauritius is not a factor beyond being a trading partner, but not in terms of establishing a foothold in the region,” the official said.

— RUBIO: U.S. FOREIGN AID BEATS CHINA’S: Secretary of State Marco Rubio defended his dismantling of USAID this week and said that U.S. foreign aid efforts will continue to outpace China’s. “We still will provide more foreign aid, more humanitarian support than the next 10 countries combined, than the entire OECD, and far more than China,” Rubio told the Senate Foreign Relations Committee on Tuesday. Rubio dismissed concerns that shrinking USAID and putting it under State would allow China to replace it through programs such as its Belt and Road international infrastructure initiative.

“China does predatory lending. That’s what Belt and Road Initiative is. They have zero record of doing humanitarian aid in the world, and frankly, they don’t know how to do it,” Rubio said. Liu at the Chinese embassy rejected that critique. “We firmly oppose discrediting and undermining BRI, and we are against all acts that lead to confrontation and rival camps,” Liu said.

— STATE FINANCIAL OFFICIALS: DELIST CHINESE FIRMS: A group of 23 state financial officials are urging the Securities and Exchange Commission to remove China-based firms from U.S. stock exchanges. The state treasurers and auditors from 21 states — including Alaska, Mississippi and Indiana — say that Beijing blocks adequate scrutiny of the financial details of such companies.

“China’s actions create an environment ripe for fraud and abuse increasing the likelihood that China-based, U.S.-listed companies will violate the disclosure, auditing, or antifraud provisions of the Securities Exchange Act,” the officials told SEC Chair Paul Atkins in a letter Tuesday.

The Chinese embassy’s Liu said that allegation ignored the Chinese government’s “zero tolerance attitude towards financial fraudulent activities of listed companies.”

TRANSLATING EUROPE

— EU SANCTIONS CHINESE FIRMS AIDING RUSSIA: Chinese companies made the list of companies that the European Union has targeted with a fresh package of sanctions for enabling Russia’s war on Ukraine. Three unnamed “Chinese entities” are listed in the EU’s 17^th sanctions package for “providing critical components to the Russian military, including for drones production,” the Council of the EU said in a statement Tuesday. Beijing is crying foul. “Those in Europe need to stop using double standards on trade and economic cooperation with Russia and hurting the lawful interests of Chinese companies,” Chinese Foreign Ministry spokesperson Mao Ning said Wednesday.

— BRUSSELS TARGETS IMPORTS FROM SHEIN, TEMU: The European Commission wants to curb the torrent of packages that Chinese e-retailers Shein and Temu ship to the bloc each day. The commission has proposed a handling fee of two dollars for packages valued under $170 that go directly to consumers, trade chief Maroš Šefčovič said on Tuesday. The goal is to coax those firms to steer those packages to European distribution warehouses at a lower fee of around fifty cents per package, POLITICO’s Koen Verhelst reported Tuesday.

Beijing senses trouble. “We hope the E.U. will honor its commitment to openness, provide an open, transparent and non-discriminatory environment for Chinese businesses, and create favorable conditions for China-EU economic and trade cooperation,” Mao at the Chinese Foreign Ministry said Wednesday.

HOT FROM THE CHINA WATCHERSPHERE

— BEIJING BLASTS TRUMP’S ‘GOLDEN DOME’ PLAN: President Donald Trump unveiled his $175 billion “Golden Dome” missile defense system plan on Tuesday, pledging that it would provide the U.S. complete protection from aerial attack. Beijing sees a potential weapon. The system will include space-based platforms “that gives the project a strong offensive nature,” the Foreign Ministry’s Mao said Wednesday. “The project will heighten the risk of turning space into a warzone and creating a space arms race.”

The White House is unmoved. “China wants a weak United States, but President Trump will always put America first and he has already made our country strong again,” said White House spokesperson Anna Kelly.

— TAIWAN PLANS RESERVIST MOBILIZATION ‘STUDY TOURS’: Taiwan’s Defense Ministry will dispatch personnel to the U.S. on two “study tours” this year to learn best practices in mobilizing military reserves in times of crisis, the island’s official news agency reported Tuesday. “The ‘Mobilization Study Tour’ to the U.S. is to observe the U.S. State Militia mobilization training and other related systems,” the report said. Those missions are part of a wider effort by Lai’s government to bolster the island’s “defense resilience” in the face of a possible future Chinese invasion attempt. The Pentagon didn’t respond to a request for comment.

HEADLINES

New York Times: In the future, China will be dominant. The U.S. will be irrelevant

Wall Street Journal: Why China’s amphibious “invasion platforms” are troubling sign for Taiwan

BBC: ‘You start to go crazy’: The Australian who survived five years in a Chinese prison

The Guardian: Pacific must not become a ‘military zone’ amid rise of China, New Zealand’s deputy PM warns

HEADS UP

— CHINESE DEFENSE MINISTER CLIFFHANGER: Will he or won’t he? All eyes are on whether China’s Defense Minister Dong Jun — who was reportedly a target of a corruption probe last year — shows up at the IISS Shangri-La Dialogue defense forum in Singapore next week. The Financial Times reported Monday that Dong’s presence is “highly unlikely” for unspecified reasons. If Dong is a no-show it will deprive U.S. Defense Secretary Pete Hegseth of a rare opportunity for a face-to-face meeting with his Chinese counterpart. Stay tuned.

ONE BOOK, THREE QUESTIONS

The Book: Broken Engagement: Interviews with those who have made — and remade — the U.S.’s policy towards China

The Author: Bob Davis is a former Beijing-based correspondent at the Wall Street Journal

Responses have been edited for length and clarity.

What does this book of interviews with 26 former China-focused U.S. officials tell us about the U.S.-China relationship?

It gives you a view of the arc of the relationship from the George H.W. Bush administration. And you can see the incredible optimism at the beginning and watch it deteriorate over the years. And — something I didn’t expect to see — was how every administration wrestled with engagement.

The first Bush administration looked at it as basically an excuse to continue talking with China after Tiananmen. Through [President Bill] Clinton’s [administration], where you see real optimism about engaging with China. And then at the very end of the Obama administration, you start to see it tailing off. And then it’s Trump.

Who among your interviewees had regrets about pursuing engagement with China?

You definitely saw people having second thoughts. People like [Obama’s Defense Secretary] Ash Carter thinking that they should have acted tougher toward China. And a fair number of the people in the Biden administration, including people like [former Deputy Secretary of State] Kurt Campbell, thought they hadn’t acted strongly enough earlier and were taking that as a lesson and making sure they took a different attitude when they were once again in power.

Can engagement ever again become the motor of the U.S.-China relationship?

There’s like a five percent chance that all this pressure on China forces it to make the economic changes that not just the U.S., but many Chinese economists have been urging forever. And then if it did, and if it was seen as less of a mercantilist, we-win-you-lose kind of country, engagement is possible.

But if the very likely outcome is we wind up in an arm’s-length relationship — trade in certain areas and aren’t hostile, that would be a win [for the U.S.]. And that’s the probable outcome no matter who is the president.

Thanks to: Heidi Vogt, Koen Verhelst, Joe Gould, Emma Cordover and Dean Southwell.

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