THE CHINESE, it is now clear, made major concessions in moving to normalize relations with Washington. Even while insisting that the Taiwan question "is entirely China's internal affair," they allowed the United States to assert-without formal challenges-"an interest" in its peaceful resolution, and to continue selling arms to Taiwan. Chairman Hua Kuo-feng said "we can absolutely not agree" to the sales. Still, China is not explicityly disagreeing -it is, rather, tolerating them. Since these are conditions that Peking rejected in the past, and since they involve a certain affront to Chinese nationalism and could yet become an issue in Chinese politics, it is important to try to understand why the People's Republic made its move.

The obvious answer is fear of the Soviet Union. Feeling the massive and still-growing Soviet deployment to its north, seeing Moscow strengthening its hand in Vietnam and Afghanistan, finding no acceptable way to improve its own relations with the Kremlin, the Chinese leaders evidently saw a critical need to tighten ties with the United States and its allies. The widening of its six-year-old opening to Washington was preceded by an outreach to East Europe, Iran and, most notably, Japan.

Does Peking mean to edge toward some sort of military alliance with Washington? The Carter administration dismisses the notion, contending that its purpose is not to squeeze or "encircle" Moscow but to balance off the substantial but different American interests in Moscow and Peking. The Russians are jittery, but as long as Chinese-American cooperation is confined to the political sphere, the Kremlin has no legitimate complaint.SALT, in other words, is still on.

The other big reason behind Peking's move apparently was to consummate a rolling decision on modernization. China's debate on how to develop a huge poor country will prbably never end. The way of the late Chairman Mao Tse-tung was highly ideological. It involved self-reliance, home-supplied (and therefore limited) capital and technology, agricultural self-sufficiency, tight internal discipline, "moral" incentives (low pay), social leveling.

The way of Chairman Hua and, even more, of Deputy Prime Minister Teng Hsiao-ping, who is regarded as the real power in Peking and the architect of the American connection, is quite different. It is highly pragmatic and involves a new emphasis on foreign capital, technology, goods and markets, a greater interest in industrial growth, a loosening of discipline, higher pay, the merit standard, an acceptance of some class gradations. Not by accident is Pierre Cardin headed for Peking.

Obviously, China's leaders count on faster progress. Their won past experience demonstrates, however, that economic policy is a continuing arena of political contention. They have taken the very "capitalist road" for which they have long lambasted Moscow. As the recent on-and-off explosion of economic and political demands in posters at Peking's "democracy wall" indicates, there are risks in unleashing popular expectations. And Mr. Teng is 74.

All this is not to say the United States should not have responded as it has to Peking's bid. Mr. Teng made Mr. Carter an offer that the president, who had invited it, could not refuse. It is only to suggest that the road is long and that the turn just taken will hardly be the last. Not headlong pursuit but prudent exploration of new opportunities is indicated.