The Tiananmen uprising marked a political setback for liberals in the Communist Party, but it did in the end provide the impetus for an economic revolution.

Urban centres that in 1989 were ungulfed by protests have been transformed by the explosive growth of private industry. Shops are now crammed with once scarce goods. City centres now boast department stores and shopping malls as modern and luxurious as any in Asia.

Shanghai is booming with shops, industry and hi tech

Tiananmen was a key driving force behind many of these changes.

After Chinese army troops moved into Beijing to crush the Tiananmen Square protests, the country's commander-in-chief, the late Deng Xiaoping, ordered that despite the bloodshed, the economic reforms he had initiated a decade earlier must continue.

But Deng's political authority had been dented by the upheaval. In the months after Tiananmen, a furious debate raged within the leadership over whether the reforms themselves had led to the unrest. Extreme hardliners even aired unprecedented criticisms of the reforms in commentaries published by the official media.

The collapse of communist governments from Ulan Bator to Berlin intensified this debate. But Deng finally emerged supreme.

Early in 1992, the political tide turned decisively in his favour. He convinced the leadership that only by accelerating the economic reforms could China avoid another Tiananmen.

It was precisely the lack of consumer choice and economic freedom elsewhere in the communist world, his supporters successfully argued, that had triggered such dramatic political change in those countries. Had it not been for the reforms of the 1980s, they said, China's Communist Party might have been toppled too.

The reformist upsurge of 1992 shattered the ideological taboos that had been restraining China's progress towards a capitalist economic system. That year, the Communist Party for the first time formally declared the establishment of a market economy as its official goal.

Deng's aim was to bring about a rapid increase in living standards as a way of blunting demands for political change.

But he did not want China to dismantle what remained of its old Stalinist economy overnight. That would force millions of people out of work and exacerbate social tensions. Rather, his strategy was to stimulate the growth of the non-state sector in the hope that this would eventually create enough job opportunities for those laid off from unprofitable government owned enterprises.

There were several risks involved in this piecemeal approach. Firstly, there was the danger that the gap between rich and poor would suddenly widen. By the mid-1990s, this indeed had become one of the most conspicuous causes of tension in Chinese society.

While the newly rich in their luxury imported cars went shopping in the expensive new malls and ate at the glitzy new restaurants that sprung up everywhere, many workers in state owned factories complained of falling living standards and a growing sense of unease about their futures.

There was the risk too that in the absence of a finely tuned legal system, opportunities for corruption would increase.

In 1992, tens of thousands of officials rushed to set up businesses, often retaining their links with government. They used their power and connections to amass fortunes in the private sector. Ordinary citizens who had complained bitterly about corruption during Tiananmen began complaining even louder, albeit now in private.

Indeed, instead of reinforcing China's stability, it could be argued that rapid economic change since 1992 has undermined it. With the boosting of private enterprise and the winding down of the state sector, the Communist Party has lost much of the control it once enjoyed over ordinary people's lives.

After Tiananmen, the party was able to reassert its authority so quickly partly because it intimidated citizens in their workplaces.

Workers are now leaving state-owned factories

State-owned enterprises then were responsible for every aspect of citizens' lives, from their careers to their housing and the education of their children. Housing is being privatised, good education and healthcare are becoming the preserves of the wealthy, and workers are leaving or are being forced out of their state enterprises in droves.

At the same time, tens of millions of rural residents are rushing into the cities in search of work. They have no ties to the state.

Economic change has also far outstripped the pace of political reform. Indeed, the very idea of political reform, which before Tiananmen had been a key aspect of party policy, is now almost a taboo subject in the official media - even though leaders continue to play it lip service.

China's top leader Jiang Zemin owes his position to the crushing of the Tiananmen Square protests. He clearly senses that stability in China remains fragile - hence the precautions each year against any attempt by dissidents to commemorate the anniversary of Tiananmen.

Tiananmen still haunts the party and shapes the decisions made by its leaders.