IN SHANGHAI and Shenzhen, on the floors of brokerages, the word is passed from dealer to dealer. In CITIC, Beijing's foreign investment building, joint-venture managers telephone each other worriedly. In Hongkong, share prices fall. Every time rumours surface about the health of the 88-year old senior leader Deng Xiaoping, they spread like wildfire. There is no reason to think that the latest bout of rumours has any more basis in fact than previous ones. Mr Deng may well live to see the handover of Hongkong to China in 1997, and into the next century. But Mr Deng is an old man, and there is no doubt that investor confidence relies to a great extent on his 'continued existence'. If Mr Deng were to die tomorrow, should investors be alarmed? It was Mr Deng who gave birth to China's reforms in the early 1980s, and Mr Deng who kick-started them again last year. Mr Deng is China's paramount leader, and has allowed no younger man to outshine him, no successor to emerge. As far as the outside world is concerned, Mr Deng is the only guarantee of China's reforms and desperately important even as a frail recluse. His survival seems all the more important at a time when China's economy is facing a potential bust after a boom. Every investor considers worst case scenarios for the death of Mr Deng. The possibility of a power vacuum which leads to chaos and then to civil war has crossed many people's minds. Top leaders, including President and party leader Jiang Zemin, Deputy Prime Minister Zhu Rongji, and others, are believed to be jockeying to gain the edge in any post-Deng power struggle. The position of Prime Minister Li Peng, still convalescing after a heart attack, is less clear. Analysts are increasingly feeling that whoever wins that power struggle, China's market reforms are now unlikely to be turned back from the path on which they have been set during the past year. Had Deng died last year, just after he called for capitalist reforms of the economy, but before the changes had taken hold, it is not certain whether his reforms would have survived him. A year later, the reforms have gained a momentum of their own and Mr Deng seems increasingly irrelevant. As Mr Deng becomes increasingly frail, he must leave economic policy more and more to those under him. Mr Deng seems, for instance, to have little to offer in terms of troubleshooting. The economy has taken off with a spurt of growth, and now faces huge problems which others, not Deng, will have to solve. It is Mr Jiang who has been nominated as Mr Deng's successor, but in the next few years it is likely to be Mr Zhu who guides the economy through its toughest times. Mr Deng pushed for growth, and got more than he bargained for. With or without Mr Deng, the economy has to be cooled effectively. It is Mr Zhu, not Mr Deng who is on the ground trying to sort out the financial mess. A lot of people have suffered as a result of Mr Deng's reforms. Unemployment in the countryside and the cities is rising fast as bankrupt enterprises fire staff or send them home on pitiful wages. Gaps in the standard of living between rich and poor are growing fast. Even if Mr Deng lives another 10 years, he may not avoid an explosion of discontent from those who feel that the reforms have failed them. Reformers took the precaution this March of writing Mr Deng's reforms into the constitution. There are still conservatives who oppose the reforms, but to say so now is unconstitutional. For the moment at least, voices condemning reform have fallen all-but silent. Should Mr Deng die they will resurface, but the fiercest defenders of old-style socialism are as old if not older than Mr Deng and will not survive him for long. With the death of Mr Deng some might be tempted to stage a hardline revival. Even they, however, may realise that after the collapse of communism in the former Soviet Union and Eastern Europe, the adoption of a capitalist economy in China is the only way to save the communist party's skin. It is not simply that a return to state socialism looks economically unworkable when the failure of that system has been revealed elsewhere in the world. Some of Mr Deng's favourite schemes, like issuing shares, are almost irreversible. As important as the economic factors, however, are the psychological factors. Most Chinese people having experienced a socialist economy are more enthusiastic about what a capitalist economy can do for them, and they must be kept happy if they are not tooppose the communist party. For many, the ''socialist market economy'' offers the opportunity to prosper, and incomes in the cities are at the moment rising as fast as inflation. Many of those who have benefitted are those who will have a voice in what happens in the post-Deng era. The children of top leaders, including Mr Deng's own, are obvious successors to their parents. This generation of leadership offspring have almost without exception become involved in the socialist market economy, not in heavy ideological debates. Should Mr Deng die,it is not in their interests to promote democracy, nor is it in their interests to urge a return to socialism. More likely, they will support an authoritarian system in which the economic system is capitalist and the communist rhetoric almost non-existent. Similarly, many government and party cadres even at the grass roots are, in their own corrupt way, making a packet out of the socialist market economy. They have no desire to return to the old days. Should Mr Deng die, most such officials will be only too glad for his legacy to survive.