BEIJING -- So this is the Sutter's Mill of auto industry growth for the 21st Century?

A new subway, air-conditioned buses, a couple hundred mountain bike franchises and unleaded gasoline would appear to serve this awakening city better than quadrupling the number of motor vehicles sold, something the Chinese government predicts will happen by the turn of the century.

The veil of thick, choking smog hangs over Beijing like a wool blanket on a sizzling summer day. At first I tell myself it is just a morning fog as I gaze out my hotel window. In the park below, dozens of early risers are gracefully performing their morning tai-chi.

But as I venture out on the sidewalk along Jianguomenwai Dajie, the main east-west thoroughfare of this spellbinding city, it becomes clear that pollution is simply part of the price China is willing to pay for its phenomenal march toward prosperity. The frail looking women sweeping dust and mud from the curbsides wear surgical masks. I wish I had one.

I tell myself I will never curse the EPA again, but enough about the grungy air. If you come here, get used to it.

If you're preparing to explore this capital of 11 million people, you must rely on taxis. The central government, not to mention your American insurance company, is not yet comfortable with the notion of renting cars to foreigners who have no experience with the Darwinian chaos of Beijing traffic. This place makes driving in Boston seem like a metropolitan driver's education clinic.

The government won't issue a license to residents over the age of 50 (I am not making this up). They figure middle-age reflexes aren't quick enough to react to the random lane changing and dodging of bicyclists. Just imagine what would happen to Detroit if the U.S. took steering wheels out of everyone's hands at their peak earning years.

You first notice there is a caste system for taxis. For 1 yuan (12 cents) per kilometer, you can ride in one of the little yellow "breadbox" Chang' an microvan taxis if you don't mind watching your life flash before your eyes as that truck comes within six inches of side-swiping you. If your self-preservation instinct is slightly stronger, there are the ubiquitous little red TJ7100 Xiali Charades, built by Tianjin Automobile Co. The fare: 1.6 yuan (19 cents) per kilometer. Finally, if you are on an expense account, there's the 2 yuan (24 cents) per kilometer taxis. Most of them are Volkswagen Santanas, although there are hundreds of older Toyota Crowns, Nissan Cedrics, or even Ford Tempos available.

Nearly all taxis have bamboo, plastic or cotton seat covers. So they're more comfortable than they appear from the outside. Usually there are artfully embroidered pillows tucked on the package tray behind the backseat. What may be lacking in exterior styling is often compensated for through interior decorating. It's worth noting that taxi drivers earn between 2,000 and 3,000 (between $280 and $360) renminbi a month, or nearly double what the average factory worker, retail clerk or journalist makes.

For the adventurous tourist setting out on foot, or the daredevil who rents a bike, just remember, you're not in California, where the law gives pedestrians the right of way at all times. Crossing the street in Beijing is a test of courage and agility.

Part of the problem is that there are very few traffic lights. Forget about intelligent vehicle highway systems. Use the horn. At strategic intersections, such as those near Tiananmen Square and the Forbidden City, there are traffic police standing on red and white platforms and wearing khaki uniforms and white gloves. But it's unclear that they have any direct influence.

To suggest that Beijing's streets are merely endless streams of thrifty people on bicycles and a constant wave of genericlooking taxis would be wrong. This curious mixture of communism and capitalism is clearly working for some people. There are many Mercedes, BMWs, Cadillacs, Lincolns and Lexuses, some driven for the 15,000 people attached to foreign embassies, others providing transportation for up-and-coming managers of the thousands of joint ventures sprouting up like mushrooms following a spring rain. Others carry government officials from meeting to meeting.

Most have been smuggled through Hong Kong in what are called (how's this for a euphemism?) "semi-knocked down kits." That means the tires and perhaps the doors were taken off before they entered the port. It's enough to avoid the tariffs, which range between 110% and 150%, depending on the size of the vehicle's engine.

Cellular phones are everywhere. Ericsson, Motorola and Nokia are already doing a land-office business. Coca-Cola and Pepsi are available from literally hundreds of sidewalk vendors, along with a variety of bottled water and domestically bottled soft drinks. The luxury hotels are filled with pricey boutiques, department stores and outlets of the Hong Kong-based Wellcome supermarket chain.

And yes, street vendors are everywhere. "CDs and CD-ROMS," a woman's voice called out, trusting that I was not employed by the U.S. Trade Representative. Curiously, I checked out her wares. I couldn't prove they were pirated. The prices weren't much lower than what I would pay in the tourist-oriented Friendship Store. After all, I was told, the worst of the piracy problem has been focused farther south in Guangdong province.

Not far from this tangible evidence of progress, the contrast between the haves and have-nots is jolting. You can literally throw a baseball from the shimmering glass towers of the luxury hotels to the closest hutongs, or back alleys, where families live in tiny shacks that make the average public housing project in the U.S. look like vacation resorts. Selling produce in front of their homes appeared to be a major source of income for many Beijing residents.

Those fortunate to have manufacturing jobs are earning 800 to 1,400 renminbi per month ($96 to $170).

Meanwhile, expatriate managers will find apartments that range from $3,000 to $10,000 a month, a not-so-subtle reminder to joint venture partners that the government prefers they develop Chinese management teams.

Walk in any of the bountifully stocked department stores along Jianguomenwai and you feel suddenly thrust into a scene as familiar as Hudson's or Macy's or Marshall Field's. The largest McDonald's outlet in the world turns out Big Macs for the masses just a few blocks east of Tiananmen Square.

In Shanghai, the sense of progress is even stronger. Imagine Atlanta on steroids. The Pudong New Area across the Huangpu River from the old city features the Shanghai Oriental East Pearl TV & Radio Tower, like two red potatoes skewered on a shishkabob stick. Brimming with high-rise office buildings, industrial parks and apartment buildings, on what used to be mud flats and rice paddies, Pudong has blossomed just within the last five years.

A parade of concrete trestles define the path of the next leg of expressway. In what some Chinese see as an excessive invasion of western marketing muscle, 8 to 10 Pepsi sings hang over each block of Nanjing Lu. This is the primary shopping district running west from the Bund, the promenade that overlooks both the Huangpu River and the showcase of classic French and British architecture that gives China's largest city (pop. 14 million and growing) its international flair.

About four miles west of the Bund is a stretch of extremely upscale retail development along Huaihai Lu, including a ritzy store opened recently by Isetan of Tokyo. The place even has its own parking lot, or car park, full of Mercedes and Lexus sedans, as well as a couple Chrysler and Mazda minivans, probably all slipped in through Hong Kong.

True, China lacks both a fully developed system of consumer credit or an adequate retail network to convert the dream of private car ownership to reality. But Auto China '96, held in Beijing in late June, attests to the spiraling awareness and desires of a population still giddy from its first flirtations with western-fed consumerism.

The young opening-day crowd rushed exhibit stands as if their favorite rock stars or movie idols were about to burst onstage. In a small room behind the Ford exhibit a dozen young men grapple for bags filled with brochures, as if they were free passes to an amusement park or a World Cup soccer match.

"This is something we only dream of today, but someday, maybe when I am my parents' age, I can own my own car." says Chen Zhu Wei, a 16-year-old Beijing resident who was particularly impressed by a Dodge Viper. "There was I time when my parents thought they would never own a television, and now they do."

Let's keep this in perspective. The government will remain the primary customer of cars and trucks for the near to mid-term future. This year, between the hundreds of low-volume domestic vehicle makes and the half-dozen major players, China will build more cars and trucks than it can sell.

Then there's the huge question of what happens to this economic growth as marginal domestic enterprises are allowed to fail, putting significant numbers of people out of work. Will the joint ventures pick them up?

"There's a little bit of the Wild West about this place now," says Majdi Abulaban, managing director for Delphi Packard Electric Shanghai Ltd. "There's a great awareness here that they need to catch up, and they need help to do that. They're selling part of most every viable business they own. It takes a lot of self-confidence to take a risk like that."