Peking's recent contract with a Hong Kong company to build its first major nuclear power plant in this southern Chinese province underscores the importance of the Pearl River delta region in China's blueprint for modernization.

The move by Peking to let the province launch a national program whose goal is to reach a 10,000-megawatt nuclear energy capacity by the year 2000 is only one of many decisions in the Chinese leadership to let Guangdong and its capital, Guangzhou (formerly known as Canton) test uncharted waters ahead of the rest of the country.

Guangzhou lies in the Pearl River delta 1,200 miles south of China's capital, Peking. That's far enough to shrug off the heavy-handed bureaucracies of China's successive dynasties, but also far away enough for Guangzhou to have earned a national reputation for independent and sometimes revolutionary movements.

Sun Yat-sen, the father of the Chinese revolution, founded the Kuomintang in Guangzhou in 1923, and Mao Tse-tung, together with fellow Communists Chou En-lai and Guo Moruo, ran their peasant institute here in 1925-26. Now the Cantonese have just as eagerly embraced the new theories of Deng Xiaoping's economic reforms.

A prevailing attitude throughout China is that whither Guangzhou develops, so goes the nation. Successful inspection tours by Deng Xiaoping, Premier Zhao Ziyang, Party Chairman Hu Yaobang and Chou's widow have been intended to shore up confidence in Guangzhou's advances while dispelling criticism of its more worrying trends.

"The Cantonese are less fearful or hesitant than the rest of the country," said a resident foreign diplomat in Guangzhou. "They're the Irish of China -- daring and rebellious."

Since Deng started testing his economic reforms in 1979, boosting national production by encouraging a mixture of state and private enterprise, worker incentives, higher pay and decentralization, Guangdong province has gone further than any other region in absorbing Western investment.

Boasting not just Guangzhou, but three out of four of the country's special economic zones, Guangdong has signed 41,000 contracts with foreign companies -- contractual or equity joint ventures, compensation deals or straightforward trade exchanges. Officials already have spent $1.5 billion in foreign capital, $700 million of which has been used to import new equipment, technology and management training.

The physical effects of Deng's reforms can be felt on the city streets. Although Guangzhou retains its characteristic turn-of-the-century shabby charm, the roadways are clogged with cars, motorcycles and trucks as well as the usual bicyles and wagons.

The traffic of foreign tourists and businessmen is equally heavy, and a sizable resident community of foreign oil men has given Guangzhou its latest nickname, "the Houston of China."

For some conservative Communist Chinese, the city looks materialistic and tasteless.

A Guangdong official from the Foreign Ministry branch recently recalled the reaction of a visiting delegation of party members from the revolutionary base of Shaanxi. "When they saw the changes here in Guangzhou, some of them burst into tears and cried, 'We fought with our whole lives for socialism in this country. You've completely betrayed us.' "

Known in the middle of the 19th century as a hotbed of resistance against British imperial gunboats, Guangzhou finds itself a century later accused of opening China up to corrupt western ways.

Superficially, the 5.5 million Cantonese seem to relish being further out on the modernization limb than any other city, including the 13 other coastal cities appointed by Deng to "open up" to the West. Guangzhou now flaunts its worldliness. Nightly broadcasts of Hong Kong television and radio picked up in some parts of the province whet consumer appetites. Small newspapers carry what Communist Party officials call "rat droppings" -- sensationalized accounts of political intrigues, sex scandals and even nude photos.

The Cantonese talk of being on "the front line" of the battle to adapt capitalist methods to Chinese communism without falling prey to the "spiritual pollution" of the West.

"Guangzhou should be made the window of society of Chinese socialism," said Tong Dalin, a party chairman in the city government. "We must clear away the pollution. The best way is to assume the offensive."

But for many Cantonese, it is hard to resist emulating Hong Kong, less than 100 miles to the south. More than 2 million visitors from Hong Kong and Macao come to Guangzhou yearly. But more important, Guangzhou officials on business now can obtain multiple reentry permits to visit Hong Kong whenever they like.

For this reason, Guangzhou officials often have a better handle on western competition and economic reform than more senior officials in other parts of the country. Their frustration with slow moving reforms is palpable.

A case in point is the 30-year-old dowager of southern Chinese hotels, the Dong Fang, now under the directorship of Li Lihua. Faced with recent competition from modern foreign joint venture hotels, such as the White Swan, the Garden and the China hotels, the rat-infested Dong Fang had no choice but to spruce itself up.

With a relatively small loan from a Hong Kong bank, the Dong Fang installed a new kitchen, computerized switchboard, fire alarms, closed circuit television, air conditioning, tennis courts, swimming pool, a disco and shops. The hotel's managers stretched their loan as far as they could, using Chinese materials instead of foreign imports wherever possible.

The hotel's gray facade, more Stalin than Hilton, was painted a pastel yellow. To the western eye, the Dong Fang was still no match for the newer hotels, but Li's commercial headaches were lost on fellow hoteliers elsewhere in China, particularly in Shanghai, once a left wing stronghold of the Cultural Revolution's Gang of Four.

"The management of the Jinjiang Hotel in Shanghai heard about our reforms and warned us, 'You better watch out. You're going too far,' " Li said.

Nevertheless, Guangzhou has moved ahead, often with the help of Hong Kong contracts. One of Guangzhou's oldest restaurants, the Tao Tao Ji, has teamed up with a Hong Kong company to revamp its management, train new staff and install air conditioning.

The vice general manager of the restaurant, Zhang Gueisheng, is gradually phasing out his state-employed workers with younger contract workers. "The older workers don't mind since many of them are going on to start their own businesses," said Zhang.

At a state-owned restaurant nearby, the Guangzhou restaurant, the municipal government ruled out any suggested joint venture with a Hong Kong company. Nevertheless, similar reforms are being undertaken there.

"Aging waiters complained, 'We used to be good enough before the reforms pushed us to the second line,' " said manager Wen Qifu. "We set higher service standards and within two months, the older ones came back to us and said, 'We can't keep up. Let us keep our salaries and we'll step aside.' "

However, persuading old waiters to resign is easier than persuading a whole country of aging bureaucrats to make way for Deng's reforms.

The White Cloud pharmaceutical factory drew heavy criticism in 1976 when it saved itself from bankruptcy by assembling a new staff of well-educated but politically criticized scientists from all over the country.

"Other factory managers didn't dare to hire people who had been sent to the countryside for political reeducation, or perhaps simply fell under suspicion because they had relatives in Taiwan," said factory vice director Tan Jincai.

"We were the first to guarantee compensation for losses caused by damage during transport, to subsidize retailers' discounts, buy back stocks of canceled or expired medicines," said Tan.

Although the company last year paid out more than 1 million yuan, or about $357,000, to meet these guarantees, the total turnover for the year was $50 million compared with $35,700 a decade ago.

The White Cloud factory's story became a play, performed by the Guangzhou drama troupe in Peking, after its debut here.

Fearful of a negative response in the capital to the play, which included sharp criticism of foot-dragging municipal officials, troupe members were relieved to open just as the October session of the Chinese Communist Party that endorsed Deng's wage and price reforms closed.

Partly because of its timing, every Peking performance was sold out and the run extended. Nevertheless, the troupe acknowledges the play's success does not signal an end to opposition to Deng's new policies.

"There are still a lot of people in the party who opppose these ideas," said the leading actor in the play, Pang Weixing.