The current political scene in China is characterized by greater stability at the top of the Party hierarchy than at any time since the overthrow of the “gang of four” in October 1976. At the same time, resistance to new policies and ideas continues to be strong at the middle and lower levels.

June 1979 was a turning point for China. In the fast-moving world of today, one has to be careful in the use of catchphrases which can easily be invalidated when events of even greater import overtake them. Even so, the Second Session of the Fifth National People's Congress (NPC) may justly be regarded as a landmark in the brief post-Mao history of the People's Republic. Its significance pales, to be sure, when set against the T'ien An Men incident of April 1976, which gave the signal to the world that political and economic changes were in the making. Teng Hsiao-p'ing, deposed from all his posts as the main victim of that incident, emerged – fully rehabilitated – two years later as the chief architect of what can now legitimately be regarded as China's New Economic Policy. Of course, the foundation stone had been laid much earlier by the late Chou En-lai. Thus, as in the past, continuity and change were to live precariously side by side.

The increase of 13·5 per cent in 1978 masks a remarkable slowdown in the rate of industrial growth in China. The data in Table 1 suggest that the gross value of industrial output (GVIO) has been growing at an annual rate of less than 5 per cent since the end of 1977 – which is less than half the average annual rate projected for the 10–Year Plan period (1976–85).

The Sino-Vietnam War of February–March 1979 marked the culmination of months of strained relations between the two neighbouring communist states. (This article explores Chinese foreign policy as it evolved before, during and after the conflict) My underlying thesis is that China's original goals were both political and military, relating to the definition and strengthening of China's role in regional (e.g. Indo-Chinese and South-east Asian) international politics, as well as China's perceived role in the global relationship between the Soviet Union and the United States. Because the conflict's military goals were not fully attained, the political goals were also not met, affecting not only the relationship between various Chinese leadership factions and their views about China's economic development plans, but also the importance of military modernization costs as part of the “four modernizations” and even China's alignment vis-à-vis the Soviet Union and the United States. I shall first describe the prelude to the war.

Of the three “great debates” of post-Mao Chinese politics, on democracy, economics and epistemology, the last one became the most politicized and crucial because it was directly related to the basic question of the legitimacy of post-Mao policies. It began with the publication of an article, “Practice is the only standard for evaluating truth,” in Kuang-ming jih-pao on 11 May 1978. The article was signed by the paper's “special commentator” (t'e-yueh p'ing-lun yuan), and was reprinted the following day in People's Daily. However, there was nothing to indicate that the article was in any way exceptional until Teng Hsiaop'ing made its theme the centerpiece of his speech at the Army Political Work Conference on 2 June. After Teng's insistence on “seeking truth from facts” (shih-shih ch'iu shih) and his criticism of people “who talk about Mao Tse-tung's Thought all the time,” but do not emulate his practicality, the campaign emphasizing the importance of practice developed rapidly and in several directions. Conferences were held to explore its significance, new authoritative articles were published which defended and amplified the anti-dogmatic stance, and over the succeeding months a series of rather repetitive speeches by virtually every provincial secretary and military region commander appeared in People's Daily affirming Teng's position. Finally, in October 1978, “special commentator” articles appeared in People's Daily which called for the deepening of the struggle against the “gang of four,” claiming that their poison had affected even some who had opposed them politically.

The rapid changes in China of the past few years have quite properly focused much attention on the problems of political succession at the top levels of Chinese politics. In part this is recognized as a generational issue because of the advanced age of the first set of leaders of the People's Republic. Indeed, this is still a question of contemporary significance. Teng Hsiao-p'ing, for example, is alleged to have said that he turned down the premiership in favour of Hua Kuo-feng because he was in his 70s whereas Hua was in his 50s. Therefore, unlike Teng, the latter could expect to guide the modernization programme through to the year 2000. One of the major problems overshadowing the current Chinese leadership (both at the levels of the Political Bureau and even the Central Committee) is that soon a new generation of leaders will replace the old. It is perhaps because of this that the current leadership has been so concerned to consolidate the new order and to set the new modernization programme upon what is hoped will be an irreversible course. At the same time one of the reasons for the reluctance of many officials at all levels of China's bureaucracies to implement the new policies with the enthusiasm and initiative expected in Peking is precisely the fear that the new policies may be reversed by a new set of leaders whose succession in the nature of things cannot be long delayed.

One of the less emphasized strengths of a world systems approach to national societies is its critical comprehension of the limited possibilities of ruling groups transforming their societies into ones of socialist relations. One limit placed on the part by the whole, on nation states by a capitalist world market, is the impossibility of building “true” socialism. The imperatives of the world market force state power-holders to act in a capitalist manner, that is, to organize their society for competition in world exchange.