I will go out on a limb for a second and suggest that the day will come soon enough when the United States formally bends the knee on this issue as well. We are headed in that direction much faster than anyone anticipated.
The 'free world' has chosen to worship the Almighty Dollar as its lord and sovereign. China is where most of your dollars come from now. Ergo, China has the mandate of market-capitalist heaven, and you work for China now.
As far as "sovereign embarrassment," there is no such thing. If you want Chinese trade and embassy relations, you put out whatever news releases, go on television, press conferences, and at the UN General Assembly you stand up and proclaim exactly what Norway has said. It's an "embarrassment" in the poster's mind, but pretty much every country has done it. Then you go behind China's back and buy Taiwanese stuff and talk to the President of Taiwan in backchannels because everyone needs cpu's, microchips, and cell phones. The level of hypocrisy is pretty high in global politics.
I do not agree with this, but it is the state of the world.
http://www.huffingtonpost.com/2014/12/11/dalai-lama-pope-fra...
http://www.telegraph.co.uk/news/worldnews/asia/tibet/9717544...
http://www.sbs.com.au/news/article/2017/08/30/pm-has-no-plan...
And there are many more examples. As China's influence grows, so too will the list of examples. Note: I'm not in support of this, just stating the current reality.
This is why Canada does not have a Taiwanese embassy. Instead, there are Taiwanese Trade offices which act unofficially as embassies in everything but name.
In all countries with Chinese embassies, this is the case.