Beijing and the Vatican are reportedly close to an agreement on the appointment of bishops in China, a deal that could lead to the resumption of diplomatic ties severed almost 70 years ago.

The secretary general of the bishops’ conference of the Catholic church in China, Guo Jincai, told Chinese state media on Thursday negotiations between the two sides had reached “the final stages” and an accord could be reached as early as the end of this month.

The Catholic church and China’s atheist Communist party have long been at odds over Beijing’s refusal to recognise the pope as head of the church in the country. Now, an agreement that recognises the Vatican’s authority but approves Beijing’s say in the appointments of bishops may be in the offing.

China, which cut off ties with the Vatican in 1951, appoints bishops through its Chinese Patriotic Catholic Association, which runs state-sanctioned churches. An estimated half of China’s 10 million to 12 million Catholics worship in underground churches headed by bishops that have remained loyal to the pope.

Under a deal, the Vatican could ask these underground bishops to serve under the bishops appointed by Beijing in exchange for influence over future appointments. The pope has reportedly agreed to accept seven bishops appointed by Beijing that the church had previously deemed illegitimate.

Asked in a press briefing about Guo’s remarks, a spokesman for China’s ministry of foreign affairs said the two sides were “making positive efforts” and China hoped the dialogue would continue so that “positive results can be achieved”.

Catholic clergy arrive for mass at Beijing’s government-sanctioned South Cathedral. Photograph: Greg Baker/AFP/Getty Images

Yet the Vatican has contradicted Guo’s statements. Vatican spokesman Greg Burke told journalists on Thursday: “I can state that there is no imminent signature of an agreement between the Holy See and the People’s Republic of China.”

He added that Pope Francis was in “constant contact” with his advisers on the issue and has been “accompanying the steps of the ongoing dialogue”.

Critics of a deal between Beijing and the Vatican say it would constitute a “moral blow” to the Catholic church. China has tightened restrictions on religious groups and cracked down on underground churches.

This week, an underground bishop in China’s south-eastern Fujian province, Guo Xijin, was detained for refusing to celebrate mass with a government-backed bishop.

There are other obstacles. It’s unclear what would happen to China’s hundreds of underground Catholic churches or the Vatican’s diplomatic recognition of Taiwan, which Beijing sees as a violation of its “one China” policy.

Some also fear a deal would further fragment the Catholic community in China. On Chinese religious news site Tianzhujiao, one commenter wrote: “The pope has betrayed his beliefs. We won’t listen to him ... We will keep our way as an underground church. We will believe what we believe and do what we should do.”