He invited all Roman Catholics in China to unite under his jurisdiction and urged Beijing to restore diplomatic ties and permit religious freedom.
In his 55 page letter, the Pope insisted on his right to appoint bishops, but said he trusted that an agreement could be reached with the Beijing authorities on nominations.
Significantly, he revoked previous Vatican-issued restrictions on contacts with the clergy of the official church, and in fact recognized that some Chinese faithful have no choice but to attend officially recognised Masses.
The Vatican said in a note that accompanied the letter that it was prepared to move its diplomatic representation from Taiwan to Beijing "at any time" as soon as an agreement with the government was reached.
Benedict praised those Catholics who resisted pressure to join the official church and paid a price for it "with the shedding of their blood." But he urged them to forgive and reconcile with others for the sake of unifying the church.
"Indeed, the purification of memory, the pardoning of wrongdoers, the forgetting of injustices suffered and the loving restoration to serenity of troubled hearts ... can require moving beyond personal positions or viewpoints, born of painful or difficult experiences," he wrote.
Time carries a full report which is under Pope: China Catholics Should Unite
The full letter is on the Vatican website and is here in English. Accompanying the letter is an Explanatory Note as well as a Declaration.