From Reuters (link):
China may approve a visit by the Dalai Lama, as long as he abandons dreams of independence for Tibet, and establish ties with the Vatican if it breaks ties with Taiwan, the top official on religious affairs was quoted on Monday as saying.
The remarks by Ye Xiaowen, director of the cabinet’s State Bureau of Religious Affairs, come just weeks before a summit in Washington between Chinese President Hu Jintao and his U.S. counterpart, George W. Bush, a devout Christian who prodded China to allow greater religious freedom when he visited last November.
The Dalai Lama said last month he wanted to go to China to visit Buddhist landmarks and witness the economic progress the Asian powerhouse has made in recent years.
See also an interview with the Dalai Lama’s Special Envoy in Washington, Lodi Gyari, in Rediff.