CONFIDENTIAL
bud, amid a general reassertion of ideological fundamentals, but this had to be done without entirely losing the confidence of the intellectuals on whom much of modernisation depends. Thirdly, and most important of all, there were major economic problems. When the veteran economists got to see the books in early 1979 they quickly concluded that the rapid pick-up in the Chinese economy during 1977-78 had masked serious structural and institutional weaknesses. Their prescription was a three-year period of "economic readjustment" (1979-81) to lay a sound basis
for modernisation.
5.
At the same time critics of the reformist tendency seized on the phenomena of youthful indiscipline and economic imbalance as weapons in a struggle to reopen the decisions of the Third Plenum and undermine the prestige of the reformers. Between March and May therefore we could detect or suspect that much of the ground which Deng had won was again under attack from the old guard, nicknamed the "Whatever" faction from their support of whatever Mao said. By June there were signs that Deng had held his ground and indeed moved over to counter-attack, but there had been a distinct wobble.
6.
Both the Chinese people and foreign observers thus looked anxiously to this Session of the NPC for a sign. How far and how unanimously did China's leaders remain committed to the
How principles of radical reform laid down by the Third Plenum? far would they keep faith with the aspirations of the population for political and economic stability, a rising standard of living and a greater measure of self-determination in their lives? Finally, what would economic readjustment mean for foreign trade?
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3.
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