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Charley Qian is not a wealthy man. As food-and-beverage manager of 88 Xintiandi, Shanghai's most exclusive serviced apartment building, his job is to satisfy the whims of the rich, anticipating and fulfilling their every culinary desire. He commutes an hour to work each morning, arriving at 7 a.m. to change into his uniform—a black jacket, charcoal striped pants, a gray vest and a gray silk tie. After attending to the day's budgeting and purchasing decisions, overseeing business lunches and catered events, handling room service deliveries from nearby restaurants and other special requests from his guests, Qian often catches the subway back to his modest apartment at 9 or 10 p.m.

But Charley Qian is far from poor. By any Chinese yardstick, he receives an outstanding salary. Including overtime, Qian stands to earn between $7,500 and $9,000 this year. That's way above average. In China's countryside (where more than 60% of the population lives), incomes average less than $300 a year, but even in the wealthier cities, the typical annual salary amounts to little more than $850.

Charley Qian belongs to China's newly minted middle class. The 36-year-old can't afford to clothe himself in Armani, Prada or Gucci, but he likes to look his best, filling his wardrobe with snappy pleated khakis and golf shirts. He carries a Nokia mobile phone, though not the latest model. He hasn't yet achieved his ambition to travel abroad, but he vacations in relative style with his girlfriend—an aerobics instructor at the nearby Radisson Hotel—and his 10-year-old son at places like Hainan Island in the South China Sea. He eschews the stock market, which he likens to gambling, and tries to avoid debt, stashing all of his extra money in the bank. Qian, who divorced four years ago, has his son's education to worry about after all, and he hopes to buy a car or even a house some day. Overall, Qian is optimistic about what's ahead for himself, for his son, for China. "It's been hard to get where I am," he says, drawing deeply on his Double Happiness cigarette. "I started as a bellboy 18 years ago. Many 16-hour days." But he is astounded now at the China springing up around him. "China is very different from what it was 20 years ago," he says. "China is catching up to Hong Kong and Japan." Does he think his country will be better off in 20 years than it is now? "I do," he says, nodding. "Definitely better."

Twenty-four years after Deng Xiaoping's first wave of financial reforms attempted to shake off the pall of the Cultural Revolution, the key to China's future is in the hands of people like Qian—members of the hardworking, skilled industrial and services sectors. The country's next cultural revolution may be sparked by the establishment of a middle class, a capitalist class, populated—in a cruel irony—by the children of those whose lives were ruined by the first precisely because they were capitalists. Sandwiched between China's nouveaux riches and the hundreds of millions of peasants, factory workers and jobless whose standard of living is plummeting in the face of wrenching economic change, a small but rapidly growing and influential middle class has sprouted in the cities of Shanghai, Beijing, Shenzhen and Guangzhou. And as China lunges toward modernity, it is this middle class that hundreds of millions of Chinese citizens must join if the country is to transform itself into one of the world's leading economies.

Around the globe, the existence of a broad and stable middle class is one of the hallmarks of an advanced economy, one of the anchors of a prosperous and fair society. But creating a sustainable middle class in a country that was founded on the principle of abolishing class differences isn't going to be easy. Corruption, a widening wealth gap, political freedoms that lag far behind economic ones and the social confusion that arises from turning generations of anticapitalist, antimaterialist dogma on its head are gargantuan obstacles. Will the middle class live up to its promise, becoming the root of sweeping social change, the touchstone from which a civil society—or even democracy—springs? Or will it become a politically docile government factotum, a willing participant in the state capitalism that the Communist Party seems intent on establishing where everything is up for grabs—except the power to rule?

Thanks to its loaded political connotations, few in China use the term middle class. Everybody, it seems, talks about it, but they use different words such as white-collar, entrepreneurs, businessmen or middle income. It has become fashionable among commentators to celebrate—even hype—the emergence of the middle class. But how many middle-class consumers are there, really? In January the Chinese Academy of Social Sciences (CASS) released the results of a three-year study on economic stratification, making it the most authoritative look at class in China so far. A sociologist at CASS who spoke to TIME under the condition of anonymity estimates that the group most people think of when asked about the middle class—managers, professionals, skilled technicians and service workers earning $2,500 to $10,000 a year each—constitutes considerably less than 5% of the national population. In other words, fewer than 65 million people.

By Chinese standards, then, members of the middle class are still a tiny minority. And yet their rapid expansion in number over the past 20 years, the degree to which they have benefited from economic reforms, their optimism about the future, and the extent to which they influence Chinese culture and society make them far more important than such statistics might suggest. Already, they are inexorably restructuring their country. "China's social stratum structure is gradually changing," observes the report. "The middle stratum will keep expanding and finally become the most important part and the most stable force in China's modern social structure."

To see how far the new middle class has come so quickly, and why many of its members might find their rise strangely disorienting, you need only visit their parents—a generation still coping with the excesses of the first cultural revolution. Take Charley Qian's father, Zhu Ansheng, who lives in a dark, cramped one-room apartment with his wife, Xiangmei, in the heart of Shanghai. "Welcome to a typical low-class home," he jokes as he serves tea and puffs on one of his ever-present cigarettes. He, a former factory worker, and she, a schoolteacher, are both retired and live on a comparatively hefty combined pension of about $3,600 a year. But despite this level of material comfort, Zhu lives with a nagging sense of missed chances and unfulfilled potential. He isn't bitter, he says, but it's clear that his life has amounted to much less than he once dreamed. The son of a printer, he was quite well off in his youth. But when the communists came to power, says Zhu, the whole family was branded as capitalists. Zhu, now 66, was never exiled to the countryside but he spent 35 years bouncing from factory to factory, trying to work hard and, above all, avoid the Red Guards' attention. So concerned was he about the capitalist stigma his name carried that he gave Qian and Qian's 31-year-old younger brother Yong (a freelance photographer in Shanghai) their mother's maiden name. "It's just fate," Zhu says. "I was just not born at the right time."

"They are a lost generation," says Jonathan Chu, a partner in an investment firm in Shanghai, about the men and women of Zhu's age. Chu's own father was banished to a remote area in Guangxi province for harboring Rightist thoughts, and Chu's grandfather, once a powerful rice merchant in Shanghai and an unrepentant capitalist, spent 24 years in prison after a photo of him with Chiang Kai-shek surfaced. "They worked hard all their lives for the betterment of the socialist state, whether they liked it or not," observes Chu. "And then Deng comes in and says, 'Thank you. Thank you very much for all your help, but you are going to have to find something else to do.' Imagine how disorienting that is." Today, getting rich is honorable again and Chu himself is based in Shanghai, living the lush life of an unashamed capitalist. The melancholic irony of his family coming full circle is not lost on him. "We live in extraordinary times. We live at a time when, with the right push, a person can be somebody," he says, pointing at himself with his thumb. "But the very same person in the same position at a different time," he continues, "would have spent his life in prison, and would have been a nobody."

For Qian's father, Zhu, it's impossible to forget the suffering he witnessed and endured during the Cultural Revolution. While he was growing up, Qian recalls, his father "never wanted to talk about what happened." The acute awareness that everything can fall apart, that fate—or grand political shifts like the Cultural Revolution—can strip you of all that you own, has left Zhu with a kind of watchful pessimism that his son's generation lacks. Zhu is delighted that Qian is doing well, but he remains cautiously guarded in his opinion of what the world tells him is an economically invigorated China. Asked what he hopes for in the future for himself and his family, he smiles broadly, delighted at the question, then pulls his visitor to view a poem he composed and hung on his front door. Entitled "Smooth Sailing," it reads, "Breakfast, lunch, dinner—the same. Last year, this year, next year—like that." "See," he says, pleased to elaborate on his poem's fatalistic message, "I don't hope for much. If you can live your life peacefully and day to day and there is not too much trouble, then you are doing O.K."

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