TAIPEI, TAIWAN, JAN. 13 -- President Chiang Ching-kuo, son of Nationalist Chinese leader Chiang Kai-shek, died of a heart attack today, ending the family rule that led the Kuomintang, or Nationalist Party, to prosperity on this island after fleeing the mainland nearly four decades ago.

Vice President Lee Teng-hui was sworn in as president, making him the first Taiwanese to become president since the arrival of the Nationalists and possibly inaugurating an era of greater influence for native-born Taiwanese, who make up 85 percent of the island's 19.5 million population. Taiwan's politics have been dominated by an aging core of Chinese who fled to the island from the mainland after their defeat by the Communists in 1949.

A 30-day period of mourning was declared and leaves were canceled for the island's military forces.

In Beijing, the Communist government acknowledged the death of Chiang, 77, with a short news item on the official New China News Agency from Hong Kong but made no comment.

For the United States, which ended diplomatic relations with Taiwan when it recognized China in 1979, the developments have economic, political and strategic significance. Taiwan is now the United States' fifth-largest trading partner, and moves that ensure stability in Taipei could safeguard these economic interests. The island is located about 100 miles from the Chinese coast, along an important sea lane, and is a few hundred miles from the Philippines, where the United States has two large military bases.

Reunification of the breakaway island with the mainland is one of the most important goals of the Chinese Communist leadership in Beijing. China has repeatedly listed U.S. support for Taiwan, particularly arms sales, as one of the chief obstacles to improved relations between China and the United States.

Lee, 64, is expected to continue pushing changes begun under Chiang, but because he has no power base and few ties to the ruling Kuomintang, military or security establishment, the efforts to liberalize the island's political system in the face of increasing opposition pressure may slow down, some analysts said.

Unlike most of Taiwan's senior leaders, who were born on the mainland and claim to be the legitimate rulers of China, Lee's generation feels less of a connection with the mainland and seems to hold less of a grudge toward the Communists.

Until a strong national leader emerges, many observers suggested, the island will be ruled by a collective leadership made up of Lee and top leaders in the government, Kuomintang and military.

Although a government spokesman said Chiang was in good health a little less than a week ago, he had suffered from diabetes and a heart condition for years, had eye problems and has been in a wheelchair since late last year.

People here first heard the news when television and radio programming was interrupted shortly after 8 p.m. A visibly shaken Premier Yu Kuo-hwa, who has served the Chiang family for decades, appeared on television at a meeting of the Kuomintang's Central Standing Committee, announcing the details of the president's death. Later in the evening people began gathering in front of the presidential building in downtown Taipei.

Although a few kowtowed in the street, most of the people seemed to be there out of curiosity. By contrast, in April 1975, when Chiang's father, the late generalissimo Chiang Kai-shek, died, people cried openly in the streets.

While the new president has maintained in interviews that reunification with the mainland is still "the ultimate goal," most of his work has involved developing Taiwan's business environment and maintaining political stability.

Although Lee lacks the enormous power of his predecessors, one expert on Taiwan, Penn State University political science Prof. Parris Chang, noted in a telephone interview that the new president, "being Taiwanese and the favorite son, has a constituency and an institutional role that will be important in years to come."

Taiwan's opposition party issued a statement supporting Lee and saying that, as an expression of condolences, it would suspend demonstrations that have been taking place.

{In Washington, State Department spokesman Charles Redman said: "We note with great sadness the passing of this respected leader."}

Upon assuming the presidency in 1978, Chiang brought a number of western-educated technocrats into the government and turned the mainlander-dominated ruling party into a party with 70 percent native Taiwanese. The president also appointed a number of Taiwanese to high governmental positions. He chose Lee, who received his Ph.D in agricultural economics from Cornell University, to be his running mate in the 1984 election.

Chiang realized that the change was necessary if the party was to maintain its dominant position in a changing political environment.

In a little more than a year, the aging president also carried out a series of far-reaching economic and political changes. In September 1986 he allowed an opposition party to be formed for the first time on the island. Last July, he lifted martial law -- which his father had imposed nearly four decades ago -- and foreign exchange controls.

Most notable was Taiwan's decision late last year to allow local residents to visit relatives in China, a move that could have been approved only with the support of the president.

"The president wants to ensure his place in Chinese history," said Antonio Chiang, the publisher of The Journalist, an independent weekly news magazine, at the time.

At the time of Chiang's death, the ruling party was also working out the details of a plan to hold legislative elections. To retain its claim as the sole government of China, the Kuomintang has refused to hold elections for vacant seats. Of the 316 seats, an estimated two-thirds are held by legislators in their late 70s and 80s, who were elected on the mainland in 1948. Until recently, the government has ruled out elections on the grounds that it cannot hold them until the mainland is retaken and elections can be held there.

Despite the late president's unchallenged authority, conservative elements in the party and the military are believed to have resisted and opposed many of the changes he supported. But a power struggle seems unlikely because the military lacks popular and economic support or experience in running the government.

Military leaders are also aware that the island's survival depends on economic, social and political stability and that meddling could jeopardize this stability. In his will, written a little over a week before his death, Chiang said the "people and the military . . . must unite as one, to struggle to the finish and hasten the recovery of the mainland."

The collective leadership likely to rule the island in the next few months is expected to include Lee, Premier Yu, ruling party Secretary General Lee Huan and Gen. Hau Pei-tsun, chief of the general staff.

Washington Post correspondent Daniel Southerland contributed to this report from Beijing.