Hoi An is a historical gem that has found a way to revitalise itself and to grow rich again. No longer collapsing into ruin as it was before doi moi (Vietnam's economic policy, instituted in 1986), protected by law from inappropriate modernisation, honoured by Unesco as a World Heritage cultural site (one of only three in Vietnam) since 1999 and substantially renovated, the old town has blossomed with a new self-belief and a vibrant energy funded by tourist yen, euros and dollars.

Few towns in Asia have such a concentration of history in such a good state of repair and such rude economic health, even if chasms exist between the new tourist economy and the old local economy. A tumble-down house next to a chic boutique, a smelly old street market leading to a parade of elegant restaurants, glitzy motorbikes jostling with battered handcarts - these are the contradictions of a town in flux.

Hoi An is probably now at its optimum state. Fifteen years ago, it was moribund. Fifteen years ahead, it could well be a gaudy theme park. Today, it enchants with a balance of controlled touristification and everyday Vietnamese life, a haven of historical integrity in a country whose physical heritage has largely been annihilated.

Most of the historical fabric dates from the late 18th century to the early 20th century, largely Chinese influenced but latterly shaped by the French. However, Hoi An's history is long and its zenith of wealth and power came earlier. The town existed during the kingdom of Champa in the 2nd to 10th centuries, recorded as a busy seaport in Persian and Arab documents.

By the 16th century, it had become one of the major trading centres of Southeast Asia. Chinese and Japanese merchants made its fortune, setting up waterfront trading houses that developed into expatriate colonies. The Japanese, however, disappeared during the 17th century after the Shogunate withdrew into isolation while the Chinese continued to expand. Dutch traders came in and French missionaries appeared, foreshadowing the French colonial takeover two centuries later.

A great Vietnamese paroxysm, the Tay Son rebellion of the 1770s and 80s, destroyed most of the town. Rebuilt after that, Hoi An retains a distinct Chinese atmosphere, with low, tile-roofed houses and narrow streets; the original structure of some of these streets remains almost intact. All the best houses were made of wood, decorated with lacquered boards and panels engraved with Chinese characters. Pillars were carved with ornamental designs.

During the 19th century, the Thu Bon River silted up, blocking the passage of ships, and nearby Danang, with its deepwater harbour, supplanted Hoi An as the main seaport of central Vietnam. With its raison d'etre lost, the old town became set in aspic - to its advantage now.

As in the old days, Duong Tran Phu is the main street, hosting a string of temples and clan houses, all facing south towards the river. They were built by the various Chinese communities and named according to their origins in China. Their titles ring with pride of origin, the Assembly Hall of the Fujian Chinese Congregation, or Hainan, or Chauzhou, etc. Each one has distinct features, with the Chauzhou hall boasting fine carved and lacquered wood, the Fujianese revelling in dramatic ceramic tableaux of mythical beasts and the Cantonese possessing an imposing covered gateway.

But most intriguing is the business end of Hoi An, the old trading houses that have been lovingly kept or restored. Several of these fascinating buildings are open to visitors, some still family homes, others now museums or hotels. The Tan Ky House is preserved in its early 19th-century form, all dark wood with a central courtyard and surrounding gallery. The septuagenarian head of the house gives revealing insights into the sense of family and continuity: 'I am the fifth generation. This house was built by the second-generation ancestor. Up until my father's generation, the family business was selling tea leaves and condiments gathered from the mountains.'

If the Tan Kys were starting up again, they would do well to avoid entering certain saturated markets. Seldom have so many tailors cut so much cloth in so small a space. Rarely have so many galleries sold exactly the same pretty pictures in the same place. And nowhere else are there classic Chinese-style lantern-decked restaurants tantalising you at every turn.

After passing Tailor No 46 and Art Gallery No 63, it is a relief to find the sobering Sa Huynh Museum, which, as well as recalling an early local civilisation, commemorates the 'American War' (Vietnam war if you insist) and 'the poison of depraved and reactionary US-Quisling troops', as a sign rants next to a pile of dusty Saigon-made LPs, 78s and 45s.

The Japanese Covered Bridge is another treasure. It is the only bridge from the old town built that connects to the old Japanese quarter, by arching over a canal. Its crusty old pink walls and ornate tiled roof conjure a cosmopolitan time, a proto-globalisation in which Japanese merchants thrived in Hoi An; elderly Japanese tourists in floppy white hats now throng along it.

At the waterfront, where once coolies laboured under bamboo poles carrying the goods of Asia, Arabia and Europe from ship to godown, where canny Chinese and Vietnamese traders struck hard deals with merchant venturers from far-flung lands, the counting houses and warehouses are now restaurants, cafes and bars, lit by lanterns at night and crowded with tourists resting from their own exertions and transactions.

The riverside is the favourite hunting ground of a common Hoi An species, the ocarina vendor. The flute-like whistles are ceramic and always brown and animal-shaped. Tortoises are most common and pretty little girls, whose sales tactics are hard to resist, are the usual hawkers.

They start young here and Hoi An's commercial future is clearly assured, if not quite as the ancestors might have imagined in their glory days.