The Vatican's New Era: Can Taiwan Deepen Ties Under Pope Leo XIV?

The election of Pope Leo XIV in May 2025 marked a historic shift in Catholic leadership, with the first U.S.-born pontiff now at the helm of the Holy See. For Taiwan, this transition presents both opportunity and challenge. The island’s government has expressed hope for deeper diplomatic ties with the Vatican, even as geopolitical tensions with China loom large. Analysts are watching closely to see how the Vatican’s new leadership will balance its long-standing One-China policy with its symbolic relationship with Taipei.

The Papal Transition: A Centrist Bridge?

Pope Leo XIV, formerly Cardinal Robert Prevost, is a centrist with progressive social views but traditionalist doctrinal stances. His swift election—concluded in just one day—signaled consensus among cardinal electors, many from regions like Asia and Latin America. This geographic diversity may influence his papacy, potentially opening doors for non-European nations like Taiwan. Yet his name choice, “Leo,” harks back to a tradition of continuity rather than rupture.

The Vatican’s priorities under Pope Leo XIV will likely mirror those of his predecessors: balancing engagement with China’s 10–12 million Catholics while upholding principles like religious freedom. Taiwan’s government, which sees the Holy See as a key diplomatic ally, hopes to capitalize on this tension.

Taiwan’s Diplomatic Gambit: Symbolism vs. Reality

Taiwan’s Ministry of Foreign Affairs has framed its ties to the Vatican as a “living symbol” of shared democratic values. With only 12 remaining diplomatic allies globally, the Holy See’s recognition is disproportionately significant. However, recent events highlight constraints: Taiwan’s president, William Lai, was reportedly barred from attending Pope Francis’s funeral, likely to avoid provoking Beijing.

The data shows a steady decline, from 23 allies in 2012 to 12 today. The Vatican’s symbolic role as a “European ally” has grown more critical as Taiwan’s international isolation deepens.

The China Factor: A Delicate Balance

The Vatican’s 2018 agreement with China on bishop appointments—a pragmatic move to gain access to China’s Catholics—has strained its relationship with Taiwan. Analysts like Dr. Thomas Tu of National Chengchi University argue that sudden shifts toward Beijing are unlikely, but gradual erosion of ties with Taipei remains a risk.

Beijing’s insistence on the One-China principle complicates matters. Any overt Vatican support for Taiwan’s diplomatic aspirations could jeopardize its access to China’s vast Catholic population. Pope Leo XIV’s U.S. background may even heighten Beijing’s vigilance, given U.S.-China tensions.

Investment Implications: Geopolitical Risk and Symbolic Capital

For investors, the Vatican-Taiwan dynamic underscores broader geopolitical risks in the Asia-Pacific. While the Vatican’s diplomatic stance may not directly impact stock markets, its symbolic role can influence regional stability.

Indices show Asia-Pacific risks remain elevated due to U.S.-China rivalry, with Taiwan’s status a flashpoint. Investors in tech, semiconductors, or tourism sectors with Taiwan exposure should monitor diplomatic developments.

Conclusion: A Delicate Dance

Taiwan’s hopes for deeper Vatican ties face steep odds. The Vatican’s One-China policy remains sacrosanct, and Pope Leo XIV’s centrist approach suggests caution over confrontation. Yet Taiwan’s diplomatic overtures—such as sending senior envoys to Vatican events—signal a strategic bet on symbolic alliances to counter isolation.

With Taiwan’s diplomatic allies dwindling to 12 and geopolitical risks near historic highs, the Vatican’s role as a moral counterweight to Beijing’s influence could retain symbolic value—even if formal ties remain constrained. For investors, the lesson is clear: in a region defined by shifting alliances, symbolic capital and geopolitical posturing matter as much as hard economic data.

This analysis underscores the intricate interplay of faith, diplomacy, and geopolitics in the Asia-Pacific. As Pope Leo XIV’s papacy unfolds, the world will watch whether the Vatican’s new leader can navigate these waters—or become another casualty of great-power rivalry.