I’m not particular troubled by this, although it does show the cutthroat nature of diplomacy.
The Vatican is out there to save souls and defend the faith (and faithful), not to promote one political system over another. It can do this better by having an official status within China.
While it may be rude to the Taiwanese government, it is not betraying the Catholics of Taiwan - they will continue to be in good hands, despite ties to the government becoming unofficial.
As for China being Satan incarnate, I have to say Satan’s not doing a very good job. While the communist government officially frowns on religion and superstition, the success of capitalism has made such policies much less important to the ruling class. Missionary work is widespread, and the underground Church loyal to Rome has never been healthier in recent years.
Religion has become less a challenge to the Party’s existence, and more a question of how to manage this social issue. Hopefully, Party leaders will soon realize that it is preferable to accept a “foreign” church as part of the religious culture of China, rather than have Catholics view their government as interfering with their faith.