(FORTUNE Magazine) – THE HYDROFOIL pulls away from its Hong Kong berth, slips past container ships, barges, and weather-beaten fishing boats, and soon is riding high above the water. In little more than 45 minutes, the craft and the Hong Kong businessmen and tourists who fill its 280 seats will be heading up the Pearl River into the fastest-growing economy on earth -- a sprawling river delta in China's southern Guangdong province. China probably hasn't registered on your mental screen since Beijing's gerontocrats pulled the plug on TV coverage of the Tiananmen Square killings in mid-1989. That tragedy clobbered most of the country's economy, but it caused just a momentary slowdown in the Pearl River Delta. For a dozen years the region has averaged real annual growth of about 15% -- a stunning accomplishment unmatched by Japan, South Korea, Taiwan, or Asia's other tigers during similar stages of development. Although China's economy as a whole hasn't done badly in the 14 years since Deng Xiaoping first loosened its Marxist straitjacket, the delta is clearly the star performer. Spreading east, west, and south from Guangzhou (the province's capital, which was once known in the West as Canton), the region has less than half a percent of China's land and a mere 16 million of its 1.1 billion people, yet in 1990 it accounted for nearly 5% of total industrial output and a remarkable 10% of exports. More important, the delta is a powerful demonstration of China's formidable economic potential. In 1978 the region was like much of China, a subsistence- level agrarian society dotted with a few unproductive state-owned factories. Today it produces a disproportionate share of the world's toys, shoes, clothing, and other industrial goods. Per capita annual income is roughly $600, about double that of China as a whole. The delta's own star is Shenzhen, a city just across the border from Hong Kong. It was a shabby town of fewer than 100,000 in 1979 when Beijing granted the first of a series of economic privileges, including letting companies retain their foreign exchange earnings and giving them freedom to hire and fire workers. Now it is a thriving high-rise urban center of two million. The city's leaders talk confidently of increasing per capita income more than threefold by the end of the decade, from $800 to $2,800. Western companies are starting to take the delta's spending power seriously. They see the region as a gateway for getting consumer goods into China. The six million people in Guangzhou's metropolitan area probably have a greater awareness of Western trends, styles, and brand names than do those of any other Chinese city. In one 14-day span last October, the Harlem Globetrotters and Paul Simon performed there -- the latter before a dancing, whistle-blowing crowd more reminiscent of America than of the People's Republic of China. Procter & Gamble launched its China efforts in Guangzhou in 1988, focusing on two products, Head & Shoulders shampoo and Oil of Ulan skin cream. Both were quick hits. Avon, pursuing its own South China strategy, started there in 1990. The company sold six months of inventory in the first 30 days. Now it has branches in Foshan and Zhongshan, major cities in the delta. Pabst Brewing Co. got a toehold by licensing its Blue Ribbon brand to the city of Zhaoqing, 60 miles west of Guangzhou. Pabst also sold to the city, for practically nothing, the equipment from three mothballed breweries in the U.S. Though Pabst first began dealing with Zhaoqing in the mid-1980s, it didn't receive its first royalty check -- 10 cents a case -- until a few months ago. But that doesn't bother Chairman Lutz Issleib. He's betting on China's potential. Says he: ''That's what this is about -- the future. Pabst has the potential to be the biggest-selling brand on the mainland.'' The delta is also attracting makers of capital goods. A dozen international companies, including GEC Alsthom of France and AEG Westinghouse, a U.S.-German joint venture, are bidding on contracts worth more than $350 million to provide cars, signals, and related electrical equipment for Guangzhou's new subway. ) LOCKHEED HAS SET UP a joint venture at the Guangzhou airport to maintain the rapidly growing fleet of China Southern Airlines. The government-owned carrier, which flew 320,000 passengers in 1978 and now carries far more than that in a single month, has added 14 Boeing 757s and 737s since 1990 and hopes to buy half a dozen more aircraft soon. Deng Xiaoping had a simple rationale for allowing economic reforms in the delta while withholding them elsewhere. ''Somebody has to get rich first,'' he has said. ''Otherwise we'll all remain poor together.'' Provinces like Guangdong were to be models that others could learn from and improve upon. But the delta region, along with parts of neighboring Fujian province, prospered so rapidly that the disparity between coastal China and the poorer interior became politically troubling to Beijing. In recent years the central government has tried to roll back some reforms. Guangdong has resisted, sometimes by simply ignoring Beijing's edicts. The province can get away with such insubordination because business is so good it no longer needs much help from Beijing. It is working to strengthen ties with nearby provinces. Says Diane Yowell, an economist at HongKong Bank: ''There is an exaggerated perception in the West that Guangdong is independent from China.'' The province has helped finance road and rail lines into Hunan to the north, and is discussing an ambitious joint hydroelectric power project with Guangxi to the west and Guizhou to the northwest. To cope with a labor shortage, cities in Guangdong have issued work permits to hundreds of thousands of residents of other provinces, where wages are vastly lower and underemployment is common. Guangdong sells about a third of its industrial output to other parts of China -- roughly the same as it exports. It is also a big buyer from neighboring areas, though not on the scale that would result if Guangdong's neighbors weren't so jealous of its ability to pay high prices for grain and other commodities. Instead of welcoming the increased income, some provinces have occasionally restricted sales to Guangdong. Such tensions raise the question of China's ultimate stability. Could it disintegrate like the Soviet Union? Said former Singapore Prime Minister Lee Kuan Yew in a recent interview with Asiaweek: ''There is a real danger, if central authority breaks down, that China will break up into the kind of provincialism or warlordism she suffered through during the 1920s and 1930s.'' ) It was from that chaotic period that Mao and his followers rose to reunite China under communism. As long as Deng Xiaoping and other first-generation revolutionaries remain alive and in charge, such cataclysmic change seems unlikely. Deng's brutish handling of the Tiananmen Square protests may have cost the Communist Party much of its remaining legitimacy, but he apparently drew this lesson: Don't give even the smallest opening to your enemies. In the months since the failed Soviet coup, the aging communists who run China have cracked down hard on trade unions while maintaining a vigilant watch over students and intellectuals. They have also reportedly sent extra troops to the northwestern province of Xinjiang, whose Turkic people have far more in common with their Muslim brethren in neighboring Kazakhstan, one of the former Soviet republics, than with the Han Chinese, who make up 94% of China's total population. THE EVENTUAL passing of Deng, now 87, could stir nationalist passions among China's ethnic minorities in Xinjiang, Tibet, and Inner Mongolia. For the rest of the country, the prevailing bet among China experts is that political independence from Beijing would have little appeal. Provinces with relatively high living standards like Guangdong already have substantial leeway to manage their economies independently of the central government. As long as they retain that autonomy, argues Yale University political scientist Wang Shaoguang, their incentive to risk economic stability for uncertain political freedoms will remain low. And despite their envy, leaders of neighboring provinces have told Western diplomats that Guangdong's success makes it easier for them to lobby Beijing for their own reforms. As the vice governor of Hunan told a visitor, ''We could progress if we had the privileges Guangdong enjoys. We want them too.'' Guangdong has one privilege the others will never have -- proximity to Hong Kong, the bustling British colony that will revert to control by Beijing in 1997. As soon as Deng Xiaoping allowed the delta to crack open its door to the West, Hong Kong's aggressive entrepreneurs came crashing through. They brought their capital, their know-how, and their Western customers. Their motives were straightforward: The tiny territory simply ran out of enough workers to make all the toys, cameras, clothing, and other labor-intensive products the West wanted to buy. Scarcely a decade ago, industrial companies in Hong Kong employed about 900,000 workers in the colony and virtually none in Guangdong. Today their Hong Kong payroll is down to about 700,000. But they employ two million to three million workers at some 16,000 factories in Guangdong province, most in the delta. Each morning tens of thousands of young, smartly dressed Hong Kong Chinese line up to catch the hydrofoil or the early morning train to points throughout the delta. Some are factory managers or technicians. Others, like a growing number of Westerners and other Asians, are out to sell products to the region's newly affluent consumers. Still others are on their way to bid along with Western companies for all the projects under way to satisfy Guangdong's huge, pent-up demand for electric power, transportation, telecommunications, and housing. Eventually they may be able to drive their own cars on a U.S.-style superhighway, an 85-mile, $1.2 billion toll road now under construction between Hong Kong and Guangzhou. Gordon Wu, a Hong Kong developer who studied engineering at Princeton in the 1950s, got the idea for the project in 1978 when he was on the New Jersey Turnpike heading for his 20th college reunion. After negotiating with mainland bureaucrats off and on for some 12 years, he signed a complex agreement that allows him to collect tolls for 30 years before turning the road over to China. Wu expects to finish the road next year. Another Hong Kong connection plays itself out each evening -- and sporadically through the night -- on the waters of the Pearl River estuary and the South China Sea, where China's territory mingles invisibly with that of Hong Kong. Smugglers roar through the dark in armor-plated speedboats loaded with color TVs and other luxury goods, then sneak into various delta ports. From there the untaxed contraband goes overland, often by motorcycle, to shops throughout Guangdong and other southern provinces. It is almost impossible to overstate Hong Kong's importance to the delta -- or the delta's to Hong Kong. Besides its role as a major employer, Hong Kong accounts for over 80% of the area's foreign investment and foreign trade. As much as 16%, or $800 million, of Hong Kong's own currency circulates freely in the delta. Guangdong, meanwhile, furnishes Hong Kong not only with cheap labor but also with most of the fruit, vegetables, meat, milk, and water the colony consumes daily. In addition, Chinese firms, many from Guangdong, have invested substantially more in Hong Kong than have Japanese companies, the No. 2 investors. NO MATTER how impressive, the statistics can't reveal much about the most important facet of this symbiosis: the way in which the capitalistic values of Hong Kong are permeating the area's consciousness. Even in casual encounters, one senses a yearning among delta Chinese for what Hong Kong has -- or seems to have. Qin Sui, a teacher in Guangzhou who originally came from Hunan, thinks Hong Kong ''is a city of opportunity, especially for young women.'' How does she know, since she's never been there? She devours Hong Kong magazines. A middle-aged driver in Shekou, a lower-delta city about an hour's ferry ride from Hong Kong, proudly shows off the Japanese TV in the small room he shares with two other men in a six-story walk-up. Next to the set is a worn piece of paper listing the week's lineup on Hong Kong's two Cantonese-language TV stations, which can be seen across a broad swath of southern Guangdong with the help of antennas or satellite dishes. He watches Hong Kong game shows, Citibank commercials touting electronic banking, and the latest news of upheaval and freedom in Europe. He is, he says through an interpreter, ''in touch.'' Before you catch the next hydrofoil up the Pearl River, though, take note: There are few easy successes in China -- even for those who do everything right. But if you have the patience to endure endless negotiations and maddening bureaucratic tangles, the delta is the place to start.