The question is though are the Soviet hardliners going to be willing (or domestically able) to play gas can and second fiddle to their peasent protogee? Unlike our Russia, who had the chance to at least shuffle (if only partially reform) her economy to get the credit for recovery compared to the Yeltsin\Mafia years and escape blame for shortcomings, a continued USSR is going to have to prop up the decrepit local industries to maintain legitimacy and will be obliged to maintain the Red Army rather than the current Russian policy of exploiting it's massive inheritance as much as it can before the structure rots away entirely. Opening up to cheap Chinese exports would be suicidal to the former, and if siding with the Ruskies slows the PRC's integration into the global investment and export market their rise is going to be slower and weaker than IOTL.
I suspect they'd be as willing as the British were to play second fiddle to the US. That is to say, not at all, but they'll have a choice between keeping the empire or making big sacrifices for uncertain gain.
The Soviets gain enormously from a friendly China and lose big from an unfriendly China.
Of course, China also loses from an unfriendly Soviet neighbour, and gains in Communist cred (stabilizing the internal system a little) by the home of the revolution not confusing them for capitalists, China can gain from trade with the Soviets, but I suspect due to geographic, technology flow, and quality factors, China would be a more important trade partner for the USSR than the USSR would be for China.
Of course, unlike the British, the Soviets have weaker institutions holding the homeland together, so if the mother party of Communism is outperformed by her Chinese "daughter", that will leach away confidence within the Soviet Union in the system, much as the apparent success of the debt-fueled growth in Eastern Europe in the 60s weakened the system. And I am not confident that the Soviets could "turn Chinese" under a later "Gorbachev" type figure (where Gorbachev was trying to "turn Czechoslovakian") and not bring everything tumbling down.
TL;DR: Eventually I think the Soviets will find themselves forced to play second fiddle and they may implode as a result.
As far as reforms go... The hardliners won't survive at all if they reform nothing. Even if they go no further than the reforms under Brezhnev... Well, under Brezhnev the Soviets were making a number of changes - of course, many of those changes were wrong or half-assed - the system was still evolving. And I'm not sure that the reforms of the 90s were anywhere close to as positive as you portray - the collapse of the system was a catastrophe - people suffered serious malnutrition, died for lack of medicine, died for lack of shelter, the health system suffered severe damage, cultural output plummeted, education was gutted, Soviet science, once a juggernaut, almost completely died away and it's hard to see how it will ever recover during our lifetimes. Also, not only sick and non-competitive industries were allowed to die, but also productive industries - gutted for the enrichment of a tiny minority. The collapse didn't just clear out dead wood - it also killed off the successor states ability to regenerate.
It was a huge disaster. Though one with a few silver linings.
As far as spending on the military, I'm not sure that's so bad either. For the price of maintaining the red army, the Soviets got a seat near the head of the table in most diplomatic forums. And that has significant economic and geopolitical benefits, though ones that are very hard to price. But for a power that was in every other respect barely stronger than Britain and France, that price was probably worthwhile. And after Stalin the Soviet system actually did a pretty good job of plumping for a fairly efficient level of military spending - enough to be a credible threat, but never succumbing to temptation to over-invest to build a war winning military (because the only way to win WW3 is not to play).
There's definite downsides to the large military - the arms race (though I think the US has its own motivations to not want that race to go too hot) and the very real risk that a careless remark on television can cause the annihilation of all civilization. But since the end of the cold war only solved the first issue not the far more serious second issue, on balance I suspect that the USSR benefited from its military spending in the cold war and would continue to do so as China rose.
Communism would be a name only of both PRC and USSR undergos market oriented reform, more so for USSR.
Not really. It's very fashionable to say that the Chinese aren't Communist anymore, but I think the crack-down on capitalists in the Party shows that there are still true believers in the Chinese Party and that aim is not simply power for the in-group, but rather to harness elements of capitalism for the furtherance of Socialism within China and China within the world.
Heck, in truth China and the Soviet Union never stopped being capitalist - all they did is replace private capital with state capital and said that this was a necessary thing for developing Socialism tomorrow.
One of the reasons why Khrushchev was chucked out of office is because he went and told the Soviet people that they'd achieved Socialism. The head ideologue of the Party at the time (Suslov) took issue with this blatant poppycock and joined Brezhnev in chucking Khrushchev into retirement. The Soviet Union was a one party state capitalist regime working towards the implementation of utopia in the future.
China, by that same token is a one party mixed capitalist regime working towards the implementation of utopia in the future. For me at least, it's the first and last part "one party" and "implementation of utopia in the future" that defines Communism. What kind of capitalism they choose is not particularly important in working out what kind of animal the regime is.
fasquardon