AS THE REST of the world looks to Peking, a generation is coming of age here on Taiwan a generation that calls itself Chinese and this island China. They wonder vaguely what will happen when Chiang dies when Mao dies if they will really liberate the mainland before the mainland liberates them. But the charade of free China is of limited interest to this-a generation bored with politics and jaded by propaganda. They are too busy surviving.

Survival in the Far East is a grim proposition that can make you old before your time. On Taiwan, the land is not fertile, and the heat and humidity are unbearable Nevertheless a new prosperity is offering more economic security than Chinese have known in this century. Between the new hotels there are still the one room corrugated tin shacks, but an incredible number of these shacks have sprouted TV antennas. The children and ancient women still desperately peddle stale cigarettes and gum never seeming to sell any-but death by starvation is a rarity in Taiwan gone, but not forgotten.

AT THE CENTER of the new prosperity is Taipei, a city of open sewers and closed minds. Taipei's International Airport is the main entrance from the outside world. The jets land, and taxi past ancient anti aircraft guns, past USAF cargo planes and the prop planes of the tiny Asian airlines.

The airport is new and efficient, if small. It was built to handle the growing flow of tourists; formerly, they were U.S. Gls on leave from VietNam, but these days, they are mostly Japanese. The Japanese fly three hours in cramped Boeing 707s-Taipei International Airport can not handle 747s-to escape their crowded, polluted megalopolis for their brief vacations.

The incoming passengers are quickly processed by the customs officials. Walking out, they are blasted by the first tropical heat. Across the mass of waiting taxis, the sun explodes off a large, green sign. It reads: "Welcome to the Republic of China." By the time the visitors are crammed into one of the thousands of tiny, unairconditioned taxis, they have usually vacated through their shirts. It is a relief to be on their way to the luxury hotels.

It is then that the changes of the last decade become apparent. Ten years ago, it would have been rickshaws waiting instead of Taiwan built automobiles ten years ago, the drive would have passed hundreds of beggars. Today, Taiwan is remarkable close to full employment, and skilled laborers are in short supply.

The first problem of the Republic of China to hit you is that Taiwan stinks. The odors that greet westerners unaccustomed to open sewage are overpowering and to their better laborers can be seen digging more open sewers. The explanation is simply that open sewage is better than none at all.

Taipei has another serious problem from the rapid urbanization it has undergone. Few people own private cars, but all companies provide executives with chauttered vehicles and Taipei has the largest number of taxis per capita in the world. The finer points of urban motoring are lost on this horde of new drivers. Traffic is a series of right-hand turns from the left-hand land, and left-hand turns in the face of a charging wall of motorcycles. Massive traffic jams are a new, common problem.

THE ECONOMIC progress that makes such problems possible is mainly the work of Chiang Ching Kuo, the son of the aging President, and one of the few competent leaders in this bastion of opposition to Communism. Ironically, the reforms he has instituted that have turned the economy around smell strongly of socialism.

In his youth, Chiang Ching Kuo was an ardent communist and studied in Moscow. His most popular move was a broad land reform program which effectively gave the soil back to the farmers. The result has been a doubling of food production and exportation of a few crops.

Most of the economic progress has come from increased foreign investment. In "Export Processing Zones," workers eat, sleep, and work in new factory complexes. The products are all exported and as a result are duty-free. The manufacturers, mostly American and Japanese, come to Taiwan because the workers are measurably more efficient than those of their own countries, and because at a dollar a day, they are cheaper.

Prices are low enough on Taiwan to allow a family to get by on low wages. A cross town bus ride costs 1:1/4 cents. A dinner at a top restaurant rarely costs more than $2. Many people on Taiwan are finding life a little easier and will tell foreigners that Taiwan is the best place in the world to live.

Life on Taiwan is at least, not bad. The people are hard-working, and characteristically honest. There is mutually no violent crime. And for few dollars it is possible to escape the city and seek a cool mountain retreat.

SUN MOON LAKE is the most beautiful resort on Taiwan. It is two and one half hours by train from Taipei to Laichung, and then another 90 minutes by bus past the farmers and water buffalo, past the hilly country, with their terraced scars of rice paddies and graves, and into the mountains, to the reservoir that was created by joining two lakes.

The government has been doing all it can to turn Sun Moon Lake into an international resort. They are finishing a $10 million Buddhist temple and plan a new highway to encircle the lake. There are already several minor temples around the lake. By climbing 400 steps up a mountainside, and 200 more inside one pagoda, one can get a view of the entire area. It is almost as breathtaking as the climb.