ONE day I walked through Tiananmen Square with a student who had taken part in the 1989 democracy movement and who is now a tour operator for an American company. "I'm out to make money now, that's all," he said. "I don't care about politics."

On another occasion I found myself sitting beside a Chinese car salesman at a dinner in Beijing. He wore designer clothes and had the bearing, and entourage, of a rich man. "Oh, I'm going to your country next week," he said. "I have a horse running at the Curragh."

Last autumn, in a village in the mountains north of Beijing, I heard a toothless peasant man heap praise on the Communist Party and Deng Xiaoping for making life better. He has electricity and a refrigerator and his son has a Japanese motor scooter.

All three had something in common. Their livelihood and interests were bound up with China's contact with the outside world.

This is a relatively new concept in historical terms. Three hundred years ago China's sophisticated Ming Dynasty withdrew from its limited contact with the world and began what China scholar Jonathan Spence called "a pattern of self defeating behaviour that within 50 years brought the dynasty to a violent end".

A long period of foreign domination, exploitation, humiliation and wars followed until half a century ago when China turned to communism to rediscover its identity.

Only after terrible mistakes and famine under Mao did Deng began to open China to the world again in the late 1970s.

Now this huge country is fully engaging with the world for the first time in its history. It is trying to do in decades what the West took centuries to achieve. And it has been spectacularly successful, with the highest growth rates ever recorded.

If China continues to grow at just 8 per cent annually, its economy in five years will surpass that of the US, which stands at $7 trillion, and its Gross National Product will exceed that of the US in 20 years.

The potential is staggering. Take just one aspect of the modernisation of China - the growing demand for cars.

China is the world's largest undeveloped car market. There are fewer than 10 million cars for a population of 1.2 billion. If it becomes a car consumer society of US proportions, it would cause a new world oil crisis there would not be enough crude oil on the planet to sustain it.

THE miracle of China's economic growth has been widely attributed to Deng Xiaoping's open door policy. But he could not have done it without finding the outside investment to modernise Chinese service and manufacturing industry.

A significant achievement was to facilitate the opening of contact between the mainland Chinese and the overseas Chinese, who had already set up networks of investment and financing through the Asia Pacific region.

There are 53 million overseas Chinese in Asia, collectively holding about $250 billion in assets. If they formed a state, it would be outranked only by the US and Japan in economic activity.

The dynamics of Asian growth cannot be understood without a thorough examination of this phenomenon, says John Naisbitt, author of Megatrends Asia, who believes the Chinese global network is the organisational model for the 21st century.

A recent survey showed that 517 of the top 1,000 companies from 10 Asian stock markets (Seoul, Taipei, Shanghai, Shenzhen, Hong Kong, Bangkok, Kuala Lumpur, Singapore, Jakarta and Manila), had an ethnic Chinese as the single largest shareholder. Overseas Chinese now account for 80 per cent of all foreign investment in China, which in 1996 was estimated at $48 billion, up $10 billion from 1995, when China received more than Brazil in all the years since the second World War.

This is one of the main reasons why China prospered under Deng while the Soviet Union disintegrated and why confidence in Hong Kong is so high as the return to Chinese sovereignty nears.

China is integrating fast into an Asia expected to become the dominant area of the world in the 21st century, forming a market the size of Europe and the US combined. It is fast changing from a survival to a consumer society which will have a middle class of 800 million by 2005.

To give an idea of the rate of development in 1960 East Asia contributed only 4 per cent of the world's output. Now it produces 25 per cent.

Having decided which way to go, Beijing showed more enthusiasm than the first Asian tigers in opening up. China is proceeding on a much more open model than Japan and South Korea a generation ago, maintains William Overholt, author of The Rise of China how economic reform is creating a new superpower.

It is not, of course, simply a matter of inviting investment. China has had to adapt the Western model of stock markets to modernise its industry, and the strength of its economy in the early part of the next millennium will depend on its success in integrating this with a quasi socialist system.

In China's Capital Market Hong Kong economist Hu Yebi says the Chinese bourses in Shanghai and Shenzhen are still at the developing stage (1995-2005) and that only in the mature stage 2005-2015) will many big Chinese companies become joint stock companies with free foreign investor participation and international standards of scale and technology.

Foreign investment, however has been accompanied by an astonishing technology transfer which has made Chinese exports competitive with Japan's in quality - unthinkable a decade ago.

Things are moving so fast that the people cannot keep up. A major challenge posed by the rush to a technology driven, high tech society of new cities and financial institutions is adequate education. From Shanghai's stock exchange so the city planning office in Shenzhen, the common complaint is the difficulty of finding qualified people. China desperately needs a new generation of professions architects, engineers, financial consultants, company lawyers, market analysts.

But the Chinese adapt quickly. Until recently, most Chinese answered the phone by asking not who was calling but what unit was on the line. The idea of a private telephone was laughable. Now mobile phones are commonplace (I have seen a street coal seller chatting on his mobile as he pedalled his cart along the street).

Foreign firms such as Motorola, AT&T, Alcatel SA, Digital Equipment and IBM are investing millions of dollars in information infrastructure. Telephone lines in China are expected to increase from 48 million in 1994 to 110 million by 2000, which, as John Naisbitt says, "is the equivalent of installing Britain's telephone network every three years".

Deng Xiaoping was one of the last revolutionary figures to lead the People's Liberation Army to victory in 1949. Under his reforms, the 2.3 million strong PLA has become the most profitable commercial enterprise in the country. Its business interests extend into Hong Kong and at home it runs karaoke bars, hotels, bus companies, and the largest nightclub in Shanghai. Military companies have interests in cigarette machines and mountain bikes and the PLA even has a joint venture with Baskin Robbins to sell ice cream.

THE pace of modernisation has brought big problems. Pollution has made big cities into health hazards. Sulphur dioxide emissions from coal fired steel plants have made Beijing into one of the world's most polluted urban areas.

But the pattern in Asia has been that the wealthier the country, the more concerned people become about the environment. China is no exception. Environmental concerns are regularly aired in the state media and many polluting factories have been closed down.

Another challenge in the coming century is coping with the consequences of the biggest population movement in history. It is estimated over 400 million Chinese will move into cities in the early part of the 21st century. One in four Chinese live in cities. By 2010 this will have risen to one in two.

To cope, China is literally throwing up hundreds of new cities, like Pudong near Shanghai which has transformed a rural landscape into Manhattan in five years. This is accomplished by using a migrant labour force of 100 million, 20 times the population of Ireland. Cheap labour is building the new China. Some 10 million migrants work in Guangdong province alone, and one million sleep in the streets.

These migrants are like a giant shock absorber in the new China. They ease the strain of overpopulation in the countryside and supply much needed labour for the booming cities. They help transfer wealth from rich to poor areas.

Nevertheless, a danger facing she Chinese government in the next century is the possibly explosive social consequences. Unemployment could reach a quarter of a million in the next 10 years, some analysts say. What would migrant workers do then? Major infrastructural projects like new highways and the Three Gorges Dam will also disrupt tens of thousands of people and transform the landscape.

There will be a huge growth in the world's biggest industry, travel and tourism, as the Chinese become more affluent. The best hotels in the world are to be found in Asia and hotel chains plan for unlimited growth.

DENG Xiaoping encouraged using Singapore as a model for future Chinese cities, and many are well on the way to that goal. Western consumer goods are transforming Chinese tastes and creating new appetites. Chinese department stores have IBM computers, Smucker's Jam, Maxwell House Coffee, Salem cigarettes, Electrolux vacuum cleaners and Estee Lauder cosmetics.

With Western consumer attitudes come Western social problems. China's divorce rate has tripled in seven years. China is losing its bearings, say critics of the rush to prosperity. The tradition of collectivism has been weakened. Chinese communism has lost its moral basis for rule by abandoning central planning and the promise of full employment.

Over half of China's state companies, on which about one in four Chinese, including dependants, rely for their livelihood, are money losing enterprises and there is no proper social safety system.

The political effects of increased wealth may be to marginalise the Communist party. What executive who gives orders in his boardroom in Shanghai or Chengdu wants to participate in a work unit party struggle session?

The totalitarianism of communist China has already receded considerably. People can adopt what fashion they please, change their jobs, vote in competitive local elections, start their own business, travel around the country with relative ease, campaign on environmental issues, do anything that does not directly challenge the authority of the government.

But without a free press or accountable politicians, China denies itself the tools of modernisation. There is no way of knowing if government statistics, on which business decisions must be made, are accurate.

Deng Xiaoping will be remembered as a chief architect of a China which will be an economic power in the 21st century. But is the Chinese Communist party he leaves behind up to the job?

Deng's strong grip on power at a crucial moment ensured that since 1989 the people concentrated their energies and talents on making money rather than mounting political challenges.

He presided over a sometimes brutal dictatorship whose leaders, as William Overholt put it, did address the people's most basic needs. In other Asian territories, like South Korea and Taiwan, reforms began with a strongmall and then continued by consensus, a transformation to democracy.

For China to flourish in the next century in an integrated economic order, it too, Western economists say, must relax autocratic rule. That is the challenge facing Deng's successors, as the global axis shifts from west to east.