Between early 1978 and late 1980, power relationships in the Pacific region underwent historic transformation. Deng-Xiaoping, re-emerging as a key leader in the People's Republic of China, demonstrated pragmatism in domestic and foreign policy. Beijing negotiated a Peace and Friendship Treaty with Japan, apparently opening an era of Sino-Japanese economic cooperation. Moscow viewed this development with alarm, fearing it would lead to a three-way alliance including the United States. Meanwhile, Japan foreswore any military significance in closer links with the PRC, but by succumbing to the Chinese demand for inclusion of a treaty clause denouncing Soviet hegemony, became an involuntary participant in the Sino-Soviet conflict.