Gradually, the forces of moderation, led by Zhou Enlai and Deng Xiaoping, resurfaced and prevailed, especially after Mao’s death at the age of 82 in 1976. After a brief power struggle against extremist elements led by Mao’s widow and a faction known as the Gang of Four, the moderate and more practical Deng Xiaoping emerged as China’s new leader. Since then, China has progressed in both the fields of foreign policy and economy.
In foreign policy, China's more moderate image led to its acceptance as a member of the United Nations in 1971. This put increased pressure on the United States to recognize the communist government in China. The Chinese communists, in turn, wanted better relations with the West to act as a counterbalance against the Soviets. In 1972, President Nixon visited China and started the long road towards normalizing relations between the two nations. A major stumbling block was America’s support of the Nationalist government of still ruling the island of Taiwan. The communist government on the mainland insisted that its relations with Taiwan were an internal Chinese affair and that the United States should cut relations with and support for the government there. In 1978 the United States agreed to most of China's demands, although it informally maintained economic and diplomatic relations with the government on Taiwan. Other erstwhile enemies, notably Japan, also normalized diplomatic and economic relations with mainland China during this period.
Economically, Deng Xiaoping, instituted significant economic reforms known as The Four Modernizations (agriculture, industry, science and technology, and military) which provided farmers and factory workers incentives to work harder. Farmers were allowed to keep small plots for growing surplus food which they could sell, while factory workers could also do business on the side as long as they did not hire (and thus exploit) employees in the capitalist manner. To many hardliners, these reforms seemed too capitalistic in spirit. However, they helped lift China's economy dramatically in the following decades. As Deng put it, he did not care whether a cat was black or white as long as it caught mice.
China's growing prosperity brought demands for more political rights and power for the common people, which Deng was not willing to grant. Unfortunately, this contrast between economic progress and the lack of corresponding political progress created tensions in Chinese society, much like the tensions in Soviet society caused by more political rights but the lack of economic progress. In 1989, massive demonstrations demanding more political rights spread across many Chinese cities. After several weeks of indecision, the aging leaders brutally suppressed the movement at Taiananmen Square in Beijing and reestablished a harsh and repressive rule.
Since then, China has rapidly emerged as a major economic force facing both new opportunities in economic and diplomatic affairs and challenges in its political policies at home. Much of what will happen hinges on what sort of new leadership would take the helm when the last of China's first generation of Communist leaders finally passes on.