Along this rugged southern coast of China where artillery shells once exploded, popular music from nearby Taiwan now pounds the ears of farmers tilling their fields.

This used to be considered the front line against Taiwan. For three decades, it was considered unsafe to construct anything other than fortifications here. But on the mainland coast that was battered by artillery shells during exchanges in the 1950s and 1960s, Xiamen officials are planning to build resorts, villas and villages that they hope will appeal to foreign tourists and Chinese living overseas.

Taiwan is not the major subject of conversation; people are busy trying to make a better living under economic reforms introduced here several years ago. In fact, Xiamen officials hope to attract more trade and investment from Taiwan, pointing out that some investors from there have come already, often without the knowledge of Taiwan's authorities.

Subtropical Xiamen is one of the country's four special economic zones set up to attract foreign technology and investments through tax benefits and low-cost land and labor.

Because of flexible government policies, a good deep-water port and telecommunications, and a long history of dealing with foreign traders and businessmen, it could prove to be the most congenial of the four for foreigners to work and live in.

Last summer, Communist Party leaders in Peking decided that coastal cities, which together with special economic zones were to take the lead in China's open-door policy, were proceeding too fast and using too much of China's foreign reserves. Peking decided to slow the development of 10 of the 14 coastal cities. Although the special economic zones were placed under fewer constraints, the Chinese leadership began to take a closer look at their weaknesses.

Like every other Chinese city, Xiamen now has less money to work with. But the uncrowded city of about 320,000 residents is mainly relying on its own efforts rather than those of the central government to grow economically. It also has the advantage of receiving financial support from thousands of emigrants from the area, many of whom live in Southeast Asia.

China's current restrictions on foreign exchange have moderated Xiamen's development, and it is too early to judge the city's long-term prospects. Xiamen still seems to have a lot of empty apartments and office space waiting for a boom. But compared with some other Chinese cities, this one seems to be moving.

Fang Hansheng, deputy chief for propaganda in Xiamen, said plans for the resorts and villas were nearly complete and that negotiations were under way with private companies in Britain and Australia to help build tourist facilities.

A young Chinese farmer turning the soil in a field facing Taiwan said that he and his family were able to make 100 yuan, or about $33, a month from the vegetables they sold. That is good money by Chinese standards. In nearby Xiamen, which is actually an island connected to the mainland by a causeway, many people seem to be making twice what they would earn elsewhere in China.

Malan Jackson, an American who is president and part owner of a yacht-building company here, says the attitude of local officials toward economic development and business relations is "totally flexible."

Jackson said that he had problems with absentee workers when he first arrived and had to fire about a dozen workers. Although it is rare for workers to be fired under any circumstances in China, Jackson said the local government supported him.

Although few Americans have invested in Xiamen to date, a few major U.S. companies have engaged in what are considered major deals by local standards. Kodak has signed a contract to sell technology to a Chinese photographic materials company here and will bring more than 30 employes and their families to work in Xiamen. Holiday Inn International has signed an agreement with the city to build a 316-room hotel.

But overall, Xiamen has attracted little high technology from foreign businesses. Many of its factories are simply assembly lines, putting together television sets, cassette players and refrigerators.

Although the Nationalist government of Taiwan has opposed it, trade has grown steadily between Taiwan and the mainland, reaching as much as $1 billion this year, according to Hong Kong estimates. But the trade, much of it going through Hong Kong, apparently has begun to slow down because of current restrictions on China's foreign exchange spending.

According to a recent report from Taiwan, three businessmen there were sentenced to prison terms ranging from 2 1/2 years to 12 years on charges of trading directly with the mainland. But Taiwan appears to accept considerable indirect trade, going through third parties or places such as Hong Kong.

The aim of the mainland authorities is to increase such links with Taiwan, thus bringing closer the day when Peking can achieve its goal of "reuniting" Taiwan with the mainland. But some of the businessmen who have come to the mainland from Taiwan are reported to be unimpressed.

Fujian Province, of which Xiamen is a part, is the ancestral home of a majority of Taiwan's 19 million inhabitants. Some Taiwanese citizens come here simply out of curiosity, by way of Hong Kong, the United States or elsewhere.