"This development is a positive fruit of the dialog established in recent years between the Holy See and the Chinese Government," the Vatican said in a statement.
The Vatican struck a landmark deal with the Beijing government in 2018, which was renewed in 2022, over the appointment of Catholic bishops in the country.
The agreement gives Chinese officials some input into who Pope Francis appoints as bishops in the country and seeks to ease tensions in China between an underground Catholic flock loyal to the pope and the state-backed church.
Shi, 94, who has been bishop of Tianjin in northern China since 2019, was ordained as a Catholic bishop in 1982 and had refused to join the state church.
Shi took part in an inauguration ceremony on Tuesday as part of his official recognition by the government, the outlet AsiaNews reported.
The ceremony took place in a hotel rather than a church, to stress that Shi had already been ordained a bishop decades ago, the report said.
The Vatican and Beijing are due to decide this autumn whether to renew their agreement over bishop appointments.
The Vatican's chief diplomat, Cardinal Pietro Parolin, had said in May that the church hoped to renew it.