The last time I visited Beijing was in 1999. Today, the capital has the feel of a butterfly emerging from a chrysalis, a bit like Berlin shortly after the fall of the Wall. The difference is that pre-Olympics Beijing is erasing the past with brutal efficiency, leaving the new splendour an alluring promise rather than a certain reality.

What is inescapable is the China growth story. The world is familiar with the rise of low-cost Chinese manufacturing, with its attendant problems of pollution symbolised by suffocating traffic in the big cities. More significant, however, is the explosion of the service sector.

Two years ago, the government, aware that its growth was heavily skewed toward production, ordered a change in the measurement of the fast-growing services component of the economy. The result was a near 17 per cent increase in gross domestic product – a dramatic increase that captures the shift from a centrally planned economy towards the increasingly important (if still fragmented) private sector.

The evolution of the banking system illustrates the scale of change. Back in 1999, all the talk was of non-performing loans and managing hugely indebted state-owned enterprises (SOEs). Today, China’s accumulation of foreign exchange reserves has helped to recapitalise the SOEs, many of which are either listed on the stock exchange or considering going public.

Guo Shuqing, the effervescent chairman of China Construction Bank, sums up the general mood of self-confidence. “Sound corporate governance is the easiest way to transform from a quasi-bureaucratic institution into a customer-based bank,” says Mr Guo. He points to annual general meetings, a board of directors, and a partnership with Bank of America that has brought new skills in terms of managing credit cards and other forms of wealth management.

In the past, admittedly, some of those very same articulate bankers have found themselves in financial or political trouble. But western executives say this time the foundations seem more solid, even though the stock market feels distinctly like a bubble. The Beijing authorities, notably Liu Mingkang, the banking regulator, should take credit for proceeding cautiously towards liberalisation. “He’s gone about as fast as he could, and we could cope with,” says one senior western banker in Shanghai.

The second seismic shift in the past decade is the rise of home ownership. Back in 1999, thanks to the prodding of Zhu Rongii, the prime minister, Chinese cities were just starting to privatise the housing stock. In most cities, people were entitled to buy their houses at a discount that depended on the length of service to the state industry that had originally provided it. The longer the service, the bigger the discount – a noble political notion but one that appeared to make little economic sense since the properties represented inert assets.

Today, the loosening of rules on home purchases looks like an inspired move. In China, the new rules kick-started the mortgage process and gave ordinary citizens a hefty chunk of collateral to finance other big-ticket purchases. It also propelled mobility in society, while providing people with the money to buy newly-built property in the capital. This in turn has attracted a huge influx of people. In Beijing alone, the number of migrant workers may have reached up to 4m out of a total population of nearly 20m in the city.

The newcomers are not only former farm workers turned hard-hats, trudging in the early hours towards the nearest construction site; they are white-collar workers engaged in fast-growing sectors such as real estate, business consultancy and software. The resultant boost to liquidity has been one of the features of the Chinese (and the global) economy over the past 10 years.

The other striking aspect of my return to China is that the Chinese themselves do not appear to conform to stereotypes in, say, Washington. Over lunch at the foreign ministry, officials are careful to avoid talk of a “second superpower”. Rather they revert to well-honed assertions that China remains a developing country. Thus, they profess a hands-off attitude to despotic regimes in Burma and Zimbabwe.

As one senior western diplomat says: “The idea that the Chinese leadership wakes up every morning with ideas about dominating the world simply does not stand up. If anything, they wake up worrying about how to deal with a hundred different problems at home.”

In the final analysis, the story of 21st century China is a narrative with many contradictions.

A Communist party that has embraced the market; an emerging economic superpower that hesitates before assuming broader responsibilities as a stakeholder in the global system.

And then there are the abiding images from the industrial powerhouse of Chongqing. Here is a city that boasts a super-modern airport and a Porsche dealership but where chickens roam the streets. But the visitor’s sense is that progress, if not inevitable, is irreversible.