China and Vietnam have outlined new steps to resolve their long-running territorial disputes in the South China Sea in an effort to avert further conflict and put their relations on a steadier footing for the future. Although both countries are ruled by Communist parties and share extensive land and sea borders, they have had a tense relationship. But they now face political challenges at home as their export-oriented economies and investment slow under the impact of global financial turmoil and deepening recession. They have evidently decided to give primacy to strengthening bilateral party, trade and investment ties to offset the wider economic downturn.