When Hsu Shu-ching took to the podium to receive her silver medal in the women's 53kg weightlifting competition, a fairly unusual flag was hoisted to honour her achievement – not the red, blue and white emblem of her home, Taiwan, but a more complicated design featuring, among other things, the five Olympic rings.

On Monday her compatriot in the 58kg competition also took to the stage at the ExCeL arena. "Kuo Hsing-chun, Chinese Taipei," came the announcement over the PA.

Such complications are the sporting symptoms of one of the most bitter disputes in modern international relations, in which an effectively independent island state of 23m people is obliged to compete under a made-up name, with a similarly artificial flag and anthem.

Still officially the Republic of China, or RoC, Taiwan separated from mainland China in 1949 when Chiang Kai-shek's Nationalist forces fled there after their defeat by Mao Zedong's communists. The RoC name symbolised Chiang's presumption that his Kuomintang party still represented China's real government rather than the communists, and would some day return. Beijing, by contrast, viewed – and still views – Taiwan as an upstart renegade province to be reintegrated, by force if necessary.

The resultant decades of heavily militarised jostling have been played out in microcosm at the Olympics. In 1956 Taiwan competed as the RoC, prompting mainland China to withdraw from the International Olympic Committee. But China's influence grew and in 1979 the IOC switched recognition to Beijing. Taiwan was left in a bind.

The eventual, somewhat messy, compromise of Chinese Taipei, at first bitterly resisted by the Taiwanese, allows the island separate participation but is sufficiently linguistically ambiguous enough to sound, in Beijing at least, more like a province than a country.

The formula is now used in everything from football to Taiwan's International Monetary Fund membership, even Miss World, which sometimes features a Miss Chinese Taipei.

Athletes who triumph under the banner even receive their medals to a special tune, officially, and wordily, known as the Anthem of the Chinese Taipei Olympic Committee.

Such is Taiwan's wider fate in an era of ever increased Chinese power. The island is now recognised as a nation by about two dozen mainly tiny nations, generally in return for Taiwanese aid and investment. Everyone else, even their close ally America, must officially pretend otherwise. As Chinese Taipei, Taiwan has had limited Olympic success, mainly in taekwondo – in 2004 the island won its only two gold medals on the same day in the sport – and weightlifting, with the occasional foray into archery and table tennis.

In London they are fielding a 32-strong squad, taking in athletics, archery, badminton, table tennis, swimming, weightlifting, fencing, cycling, sailing and taekwondo. Their opening ceremony flag bearer was the men's 105kg-plus weightlifter Chen Shih-chieh. Taiwanese Olympic success is hugely appreciated on the island, even under the name of convenience, said Jacqueline Shen, deputy head of the country's Olympic committee. "It means a lot to people, even though it's not easy for us. In reality we are a separate country. Chinese Taipei is a political term rather than a geographical one. We don't like it but we can cope with it.

"It's a bit unfair on the athletes. We explain it to them and they understand why we have to use this name and this flag. I'm sure they'd rather see their flag but it's a political reality."