In 2008 the ruling Vietnamese Communist Party (VCP) maintained its firm grip on power, rejecting domestic and international calls for political reform and pluralism. In one of the most controversial demonstrations of government power, two reporters of the state sponsored Thanh Nien and Tuoi Tre newspapers were arrested in May for their coverage of a major corruption scandal in the country. In October the People's Court found both journalists guilty of “abusing democratic freedoms to infringe upon the interests of the state”. On the economic front, Vietnam has been severely affected by soaring inflation and downward pressure on the country's currency, the dong, raising international concerns about the country's economic stability. The economic turbulences provided a fertile ground for the revival of conservative politicians whose strengthened influence poses a challenge for Prime Minister Nguyen Tan Dung. A champion of economic reform, Dung has emphasized the importance of anti-corruption efforts and sought to increase ministerial responsibility in place of close party control. Despite some high profile anti-graft cases, corruption and abuse of office remain serious problems and continue to test the VCP's legitimacy.

In foreign affairs, Sino-Vietnamese relations seemingly improved after the low point in December 2007, when the Vietnamese government tolerated anti- Chinese demonstrations outside the Chinese embassy in Hanoi and consulate in Ho Chi Minh City. Hanoi and Beijing announced a “comprehensive strategic partnership” and agreed to set up a “hot link” between the two countries. However, beneath the surface the bilateral relationship is more sour than sweet and several new disturbances emerged during the year. While economic relations between Vietnam and the United States have gone from strength to strength — in June, Vietnam and the U.S. agreed to launch negotiations on a bilateral investment treaty — diverging views on human rights continue to be a persistent thorn in the side of Hanoi's relations with Washington.

Growing Societal Demands for Change but Slow Progress on Political Liberalization

Advocates of faster reform for Vietnam essentially saw the years between the 9th Party National Congress in 2001 and the 10th Congress in 2006 as lost time.