(FORTUNE Magazine) – On a blustery October day five decades ago, Mao Zedong proclaimed, "China has stood up." Thus began the People's Republic of China.

From 1945 to 1949, as a transportation officer for the United Nations in central China and then as a correspondent for Life magazine, I witnessed much of China's civil war. During most of that time, the Nationalists, led by Chiang Kai-shek, clung to the big population centers, while the Communists, led by Mao, infiltrated the countryside. Mao boasted that eventually the cities would "fall like ripe melons." Starting in late 1948, his prophecy came true: Chiang's four Nationalist strongholds--Shenyang (then known as Mukden), Xuzhou, Taiyuan, and Nanjing--all fell.

I was in the four cities while they were under siege: Few people, Chinese or foreign, saw as much as I did of this awful conflict that brought death and suffering to millions of Chinese. The war was terrible to witness. But for me that period also began a lifelong connection to China in particular and to Asia in general.

China in the 1940s was an exasperating place. Transportation and communication were primitive. Most roads were ruts worn into existence by a 2,000-year procession of wheelbarrows and mule carts. With patience and shouting, you might get through on the phone to Nanjing or Beijing. But calling any other city, particularly those under siege, was like trying to telephone Mars. The only way to find out what was going on was to hitch rides with the Civil Air Transport planes piloted by General Claire Chennault's former Flying Tigers. Their destinations and cargo depended on the vicissitudes of the war. On one flight it was 63 Trappist monks accompanied by eight cows. On another it was 200 orphans being flown out of harm's way.

Landing on the hacked-out dirt runways, sometimes with the fat- bellied C-46s loaded to the ceiling with high explosives, was more than a little unnerving. It was on one such flight that I happened to land in Shenyang just as it was falling to the Communists--and so was the only foreign correspondent present to report on that turning point.

Over the past 50 years I've often wondered how Shenyang and the other three cities fared under Mao and his successors. During the war Mao had written a poem describing how Genghis Khan and China's early rulers were uncultured. "These men belong to the past," he wrote. "Only today are there men of feeling." The Great Helmsman may have been a man of feeling, but he was also as tough and tyrannical as any emperor. Mao consolidated his power in brutal fashion, killing or destroying millions of class enemies. Then there was the Great Leap Forward of the late 1950s, in which tens of millions starved; the Hundred Flowers Campaign, which decimated intellectual life; and the decade-long Cultural Revolution, which brought China to the edge of chaos.

Since the economic reform era began under Deng Xiaoping in 1979, I had seen how coastal China--Beijing and Shanghai--had been transformed. But what had happened to the four former Nationalist strongholds? Nanjing is a prominent city, but the other three are off the beaten path: When was the last time you saw an article datelined Xuzhou? I feared--or maybe hoped--that change had passed them by. This summer, accompanied by photographer Fritz Hoffmann, I set out to revisit the four cities. Here is what I found.

SHENYANG--OCTOBER 1948

"This is a ghost city," I cabled Life on a freezing autumn afternoon when Communist General Lin Piao's soldiers were about to march in unopposed. "Freezing blasts of wind whistle down its broad empty thoroughfares. Shop fronts, and even some of the pillboxes vacated by their Nationalist machine gunners, are boarded up...."

Ghost city no more: From one million destitute people then, Shenyang has swelled to a population of 6.8 million. Some residents are obviously affluent and not averse to being seen in skin-tight Ralph Lauren jeans or Gucci ties. Traffic jams lock taxis, buses, and bikes in a honking mishmash.

A few landmarks from the 1940s remain. The 100-foot-high Soviet victory obelisk, erected in 1945 and topped with a Russian tank, even now guards the railroad station, itself still a magnet for the desperate. In 1948 the station was jammed with civilians and soldiers selling their belongings to buy a rail ticket to safety. Today it doesn't look that different, as idled workers sell their TVs and radios to eke out food money. The Tschurin Co. department store building also survives, but that drab Soviet temple to commerce is now a glitzy Chinese emporium filled with jewelry and watches.

Shenyang has not stood still. After the civil war it became a center of state-run heavy industries. The city continues to rely on these industries, and the air is heavy with smog, but they are no longer the only economic game in town. Since 1988, with the establishment of the Economic and Technological Development Zone, Shenyang has been trying to replace its dirty old industries with clean new companies. The zone's pristine glass-and-cement plants represent some $4 billion in foreign capital, says Li Yuping of the city's investment office. Most of the money comes from Japanese, Korean, and Taiwanese technology companies; there are also a number of American firms, including Hewlett-Packard, IBM, and PE Corp. The city is beginning to sprawl, with its old downtown lost amid the development; skyscrapers sprout everywhere.

One of the fastest-expanding Taiwanese firms, President, is a low-tech concern that makes dehydrated soup noodles. Chou Ching Mao, the company's president, demonstrated how a $25 million assembly line, operated by a handful of white-smocked workers, can turn out 20 tons of the convenience food every day. Chou plans to double the size of the plant next year--but not the size of his bare-bones work force. That's the problem. The new, mostly foreign-financed plants are cleaner and more profitable than the massively overstaffed state-run factories, but they do not employ nearly as many people. The number of laid-off workers in the city, estimated at 400,000, is growing steadily. Street protests among the jobless are common, though so far peaceful. Anxious to get the unemployed back to work, or at least to keep them quiet, state employment agencies offer retraining classes, while the Workers' Cultural Palace provides such diversions as disco dancing--starting at dawn.

More surprising to me than the influx of big Asian corporations is the number of pioneering Americans. In the 1940s only a few American fur traders trekked up here. Today the U.S. entrepreneurs are a much more diverse crowd who have come to Shenyang in part because of its relative obscurity: The competition is less fierce than in Beijing, Shanghai, or Guangzhou, China's most prosperous and cosmopolitan cities.

Tom Kirkwood, the 33-year-old president of Shenyang Shawnee Cowboy Food Co., is the whirlwind manufacturer, marketer, and promoter of a chocolate taffy named Longhorn Bars that he and his 89 employees turn out by the truckload. "My business plan was simple," he says. "Children love candy and cowboys. And with China's one-child policy, they rule the roost."

Daniel McCort, 36, from Atlanta, who holds a Ph.D. in business administration from Georgia Tech, has established a management training center. Miami golf pro Michael Stewart, 38, a cousin of Payne Stewart, winner of this year's U.S. Open, is resurrecting the 18-hole course at the palatial Shenyang Shenjing International Golf & Country Club. Hartmut Ballin, 59, former manager of New York's Plaza Hotel, runs the four-star, 588-room Traders Hotel.

One of the most successful American-run ventures is a chain of private English-language schools for 4-year-olds and up, launched last year by Christopher Williams. "Chinese parents are determined to see their kids get ahead," says the 28-year-old Williams. "They think English is the key." His business is booming, with 2,500 students and 72 American, Canadian, and Chinese teachers spread over five schools. Williams shut down his classes for a week following the bombing of the Chinese embassy in Belgrade, but his business suffered no damage. The American consulate was not so fortunate. Organized mobs smashed every window, forcing the staff to take refuge in the Traders Hotel. Returning a week later, the staff gathered up tons of rocks hurled into the building.

Still, that was nothing compared to the wrath experienced by Consul-General Angus Ward and his staff after Mao's troops took over the city in 1948. I had stopped in at the consulate just ahead of the Communists, to find the white-bearded Ward barricaded behind a year's supply of flour and canned food. The State Department had ordered him to try to establish communications with the Communists. Though fluent in Chinese, Ward failed. For a year he was held under house arrest, then clapped in a solitary, unheated jail cell on trumped-up charges of having beaten a Chinese employee. It was only after President Truman interceded with Chairman Mao that in December 1949 Ward was finally able to leave.

XUZHOU--NOVEMBER 1948

Xuzhou (pronounced "shoe-JOE") was strategically vital to both Communists and Nationalists: It was (and is) the intersection of two of the country's main rail lines, and the Grand Canal also passes by. When I left in November 1948, it was suffering the effects of the Battle of Huai-Hai, one of the biggest of all time, and the Nationalists were sweeping up people from the refugee-packed streets to dig trenches and patch the city's protective walls. Trucks, mule carts, and rickshaws filled with wounded soldiers straggled in from the battlefront, 25 miles east.

Xuzhou today is not as modern as Shenyang, and there are not as many skyscrapers as in Nanjing or Taiyuan. Compared with these cities, more of its older buildings have survived, making it more resonant of the China I used to know. Until recently it didn't even have regular air service. For all that, Xuzhou is a far different place from the panicked city of 250,000 I left. It's now a modern metropolis of more than 1.5 million, with "growth" and "development" as its catchwords. "Our annual GDP exceeds $7 billion," brags Wang Xilong, the balding, 57-year-old Communist Party chief, whose brisk manner and sharply pressed blue suit give him the mien of an American CEO.

City officials have big plans, speaking grandly of a "Euro-Asia land bridge," a proposed highway stretching from Xuzhou through Siberia to Amsterdam. Giving the city its biggest economic boost is the new Jin Shan Qiao (Golden Garden Bridge) Development Zone. In it are Japanese, German, and American (Kodak, Rockwell, and Caterpillar) factories. An entire village, called Long Tan Gardens, has been built for foreign executives; it looks like a new housing development in Anywhere, U.S.A.

The Caterpillar plant, which assembles hydraulic excavators for sale in China, represents a $45 million investment. Its joint venture partner, Xuzhou Construction Machinery Group, holds a 15% interest and helped recruit the 300 workers. "I can't tell you how proud I am of the quality of the machinery we are producing here," says Roger Spencer, 55, quality resources manager of the sprawling, spotless Caterpillar factory. "You train these workers once."

Prosperity is inching in. The city's new supermarkets, air-conditioned just short of frostbite, bulge with packaged fruits, vegetables, and meat, some of it from as far away as New Zealand. There's a 15-minute wait for a seat in the Kentucky Fried Chicken franchise. And oddly, Xuzhou claims Newark, N.J., as its sister city. This is clearly a place in a rush to modernize.

But Xuzhou also retains a keen sense of its past. There is a beautiful museum of Han dynasty arts (Xuzhou was the hometown of Liu Bang, the first Han dynasty emperor, circa 206 B.C.). A museum of the Battle of Huai-Hai, also new and excellent, draws 600,000 visitors a year. More than one million men faced each other at close range during that epic battle; perhaps half were killed or wounded. "Xuzhou was like your Gettysburg," says a Chinese military historian. I was fascinated by this museum, with its three-dimensional maps, photographs, and film clips. But what I wanted to do most was find the village of Zhou Zhuan, where I had crouched in a mud hut, listening to Nationalist artillery shells scream overhead and the crackle of Communist rifle fire 500 yards away.

There are three villages named Zhou Zhuan within 30 miles of one another. Bumping over pitted dirt roads, we went (naturally) to the two wrong ones first. Finally, at the foot of Yellow Dragon Hill, some 25 miles east of Xuzhou, we found the Zhou Zhuan where I had spent the most terrifying night of my life.

This hinterland produces 80% of China's soybean powder and lots of garlic, but little else. Compared with the transformation of Xuzhou, little seemed changed in Zhou Zhuan. Ducks, chickens, pigs, and bare-bottomed children scampered through the muddy streets lined with thatch-roofed dwellings. At least the village is at peace. Fifty-one years ago the place was deserted and ringed with tanks, trenches, and mud pillboxes.

Fritz and I climbed the rocky hill where I had encountered Lieutenant General Li Mi, commander of the Nationalists' 13th Army Group, directing artillery fire. About 100 soldiers had been sprawled over the craggy slope eating their evening bowls of rice, weapons in their laps. Now quarry workers below were turning this hill into gravel; in a year or two it won't exist.

Reaching the top of the hill, I remembered watching the battle as the sun dipped below the horizon and Li shouted curt commands into a field phone. Ahead of the artillery, the 37mm guns on Li's tanks cut red streaks through the blackness. Occasional flares lit the sky. My reverie was abruptly interrupted when the quarry workers set off a succession of dynamite blasts--a vivid, deafening reminder of what China's civil war sounded like.

TAIYUAN--DECEMBER 1948

As I walk through the glitzy Shanxi Grand Hotel lobby, a child eager to practice English stops me. "My name is Simon. I'm 8 years old," says the crew-cut boy. Then he hands me his printed calling card--including his e-mail address.

What a difference half a century makes! When I was last here, this old walled capital of Shanxi province had been under siege for five months. Children were starving, not chatting up foreigners in a second language. Food was so scarce that when a man dropped dead, two women, I was told, claimed him as their husband. They both wanted his body to eat.

Taiyuan was an important target because of its huge arsenal. But the shells for its weapons, as well as the sacks of rice needed to feed the soldiers, had to be parachuted in because the surrounding hills were honeycombed with Communist gun emplacements. Sometimes American mercenary pilots would drop half their loads from the air, then try to land their lightened aircraft. The trick was to zoom in, jam on the brakes, dump the cargo, and then take off before Communist mortars could target the plane. That's how I got to Taiyuan the first time.

The old airstrip is now a children's playground, with brightly painted swings and slides. The plump children and their robust parents are living proof that cannibalism is no longer on the menu; restaurants brim with food and customers. The city's massive North Gate, through which Mao's troops poured, has been preserved as a landmark of the Communist victory; as in most Chinese cities, though, the ancient walls that once ringed the city are either rubble or gone altogether.

Unlike Shenyang, which embraced economic reform at an early stage, Taiyuan was slow in moving to capitalism; unlike Xuzhou, Taiyuan was not a transportation hub; and unlike Nanjing, it was not politically important. Taiyuan therefore sat out much of the tumult of China's rush to the market. In some ways, this has been a blessing. With its broad, tree-lined boulevards, Taiyuan is more inviting than Shenyang or Xuzhou, where new factories pop up even in old, established neighborhoods. But here, too, the Communist economic legacy is being dismantled.

After the civil war, the new government converted the former arsenal into a plant belonging to the state-owned Taiyuan Heavy Machinery Group. It became a classic example of a state-owned enterprise, with dozens of product lines. The company, known as TZ, now encompasses 20 enterprises employing 30,000 workers. Annual sales are $120 million; officials won't say whether it makes money. Its plants, spread over almost five square kilometers, make everything from giant cranes, which are currently being used for building the Yangtze River dams, to satellite-launching towers (which I was not permitted to see).

"Until 1997 everything here was government-planned," says TZ's senior engineer and vice general manager, Tang Bao Ren. "But the company has since been decentralized, and the number of workers is being reduced." Then, realizing he was talking to a capitalist, he added brightly, "Today our workers can even buy TZ shares on the Shanghai stock exchange."

Few foreigners live in this sweltering, bustling interior city of three million. Even so, TZ has managed to establish 11 joint ventures, three of them with American companies: Harnischfeger (mining shovels), Morgoil (oil-film bearings), and ESCO (wear-resistant blades for mining and earthmoving equipment).

Mark Mallory, general manager of ESCO's mineral-processing division, started talking to TZ about a joint venture in 1995 when it had become clear that a seven-year licensing agreement with his company, based in Portland, Ore., wasn't working. "The phone never rang," said Mallory. "The Chinese engineers didn't understand how to use our equipment. But they were too embarrassed to ask."

Negotiations dragged on for two years, but in 1998 the joint venture, in which ESCO has a 51% interest, poured its first manganese steel castings. That happened only after Fred McBane, a gruff, good-natured 42-year ESCO veteran, was sent over to organize the place. "Nothing worked," growls McBane. "All the valves and burners were shot. There were 32,000 tons of junk lying around. And I kept finding hideaways where workers were sleeping." His description sounded to me like the old Taiyuan.

McBane is still there and still grumbling; the city government is still earnestly working to attract more private enterprises. "We believe in communism, but we can learn some things from capitalism," says the dapper first deputy mayor, Cai Zhong Hu, who can press the flesh as well as any ward heeler.

Taiyuan's chief attraction is its rich deposits of coal, iron ore, and gypsum; there may be considerable natural gas reserves as well. But you have to wonder whether the city fathers quite have the hang of this capitalist thing. Smiling portraits of officially designated "model workers" line the main thoroughfare. And the major stumbling point in the ESCO negotiations was that TZ wanted the right to decide how many workers the plant should have, and who--not the kind of thing any sensible business is willing to delegate. ESCO finally got its way.

Still, there are signs that Taiyuan is joining the long march to the market. Most of the billboards on Welcome Chairman Mao Street now advertise consumer products. The twin towers of the almost completed Shanxi International Trade Center will top out at 42 stories, dwarfing the twin pagodas of the Monastery of Endless Happiness, which dominated the skyline in 1948. A shiny new $25 million joint venture Coca-Cola bottling plant is producing 400,000 24-bottle cases a month for local consumption. Street-level capitalism is thriving, with flimsy vendor stalls wedged between all the new steel and brick structures. Another profitable small business is to set up billiard tables near the job sites; construction workers like to shoot pool at the end of the day.

One building that hasn't changed in centuries is the provincial governor's headquarters. I went there in 1948 to interview Marshal Yan Xishan, who had 90,000 troops under his command, including 400 vagabond Japanese soldiers left over from World War II. Suffering from diabetes as well as from the Communists' gradual encroachment, the 66-year-old looked exhausted. "See these?" he asked, pointing to a cardboard shoebox filled with 500 white potassium cyanide capsules. "They are for my 500 commanders to swallow if the Communists capture Taiyuan." Before closing the box, he pointed to a single black capsule: "That one's for me." Shortly before the city fell, the old marshal flew away, eventually joining Chiang in Taiwan. He died there of a heart attack in 1960--without the bitter taste of potassium cyanide in his mouth.

NANJING--APRIL 1949

By the early spring Communist troops had reached the outskirts of Nanjing, the Nationalist capital that had been so brutalized under the Japanese occupation. Chiang had resigned on Jan. 21 and turned the government over to vice president Li Zongren, who pleaded with Mao for peace--"even," he declared, "if it means my being boiled in oil." Mao instead ordered his troops to attack. With the Communists advancing on all fronts, Nanjing was in panic. Cursing, fighting, and bribing, residents surged aboard any boat or train that would carry them. Well, some things haven't changed. Boarding a train in Nanjing this summer, I found the wild pushing and shoving almost as bad as in April 1949.

"Happily, I wasn't born yet when the city suffered those terrible convulsions," said Yu Yong Je, the 43-year-old deputy office manager of the Panda Electronics Group. His company was almost transplanted to Taiwan during the mass evacuation. "All of our factory equipment was down on the dock waiting to be loaded on a ship," he says. "But the workers refused to go."

The capital of Jiangsu province, Nanjing now has five million people, more than four times its population during the civil war. Jin Zhong Qing, the vice governor, says Jiangsu has attracted 125 FORTUNE 500 companies. The city is not on the conventional foreign tourist route, but busloads of schoolchildren come from all over China to climb the 300 gleaming white stone steps up Purple Mountain. At the top they gaze at the crypt holding the remains of Sun Yat-sen--the man who overthrew the Manchu dynasty in 1911 and founded the Republic of China. (Both Taiwan, whose formal name is the Republic of China, and the mainland, which is the People's Republic, lay claim to Sun's legacy.)

Today Nanjing is one of the most livable cities in China, with many parks, tree-shaded streets, and terraced apartments. It is also booming. Vast quantities of goods move in and out of the same Yangtze River docks where fearful citizens tried to escape 50 years ago. "You get unloaded here too quick to have any fun," complains Constance Xyristakis, chief engineer of the Greek freighter Aris, perhaps referring to the seedy massage parlors that hire some of the young women laid off by the state-owned factories. "There's always another ship waiting for your berth."

My most vivid memory of Nanjing is of the day before the Communists walked in. Daylight had done nothing to lift the dark and desperate mood of the city. At Sun Yat-sen Circle, where young lovers now snuggle together at night, the throngs of shouting, arm-waving moneychangers had dwindled to a few. At the old Ming Palace Airport (where the Jincheng motorcycle factory now churns out engines for Japanese Suzukis as well as for its own bikes), salvage crews were melting down the wings of wrecked Chinese air force planes to make aluminum kitchen utensils. "Instead of beating swords into plowshares," I wrote in my notebook, "the Chinese are converting American war surplus into pots and pans. Wouldn't that piss off American taxpayers!" That evening Nanjing lay quiet. Street lights still flickered wanly until the 11 P.M. curfew, then blinked out. A few rifle-toting gendarmes wearing shabby black uniforms roamed the deserted streets.

It was 3:30 in the morning on April 22, 1949, when the Communist attack began. The defending artillery batteries fired a few perfunctory shots. That was all. Mao's shock troops jammed onto barges and struck from across the Yangtze. "The river rang with the silvery notes of bugles," exulted the Communist radio. The Nationalist capital now belonged to Mao Zedong, as the rest of China soon would.