Vietnam -

ai Fo was a bustling port in which Chinese and Japanese merchants traded silk, lacquer and porcelain with Indians and Europeans, worshipped at ornate temples and met at splendid clan houses. The streets were filled with traders from East and West, and Vietnamese in conical hats going about their daily business.

Hoi An is an old town of narrow streets, lined with chic restaurants, pretty guest houses, scores of art dealers and tailors' shops, and ornate temples and clan houses. The streets are filled with tourists from East and West, and Vietnamese in conical hats going about their daily business.

Fai Fo and Hoi An are the same place, with a few centuries and several culture shocks between them. But if an 18th century Fujianese merchant were to rise from his grave and walk into the street today, he would recognise a great deal of what he saw, give or take some blue jeans and motorbikes.

Hoi An, once known to foreigners as Fai Fo, has found a way to get rich again. No longer collapsing into ruin as it was before doi moi (Vietnam's new economic policy instituted in 1989) it is now honoured by UNESCO as a World Heritage site, and protected by law from inappropriate modernisation. The results have been impressive. Substantially renovated to its former beauty, the old town has blossomed again with a new self-belief and a vibrant energy funded by tourist yen, euros and dollars.

Few towns in Asia boast such a concentration of well-preserved history combined with such rude economic health. Admittedly, there is a visible chasm between the new tourist economy and the old local one. A Gap-clad American couple strolling past a wizened old lady in a conical hat and pyjamas, 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.

For the visitor, Hoi An is probably at its optimum state right now. Fifteen years ago, it was moribund and dilapidated; fifteen years ahead, it could well be a theme park. Today it enchants with a successful balance of controlled touristification and everyday Vietnamese life, a haven of history in a country whose physical heritage has largely been annihilated.

Most of the town's visible history dates from the late 18th to the early 20th century. But Hoi An's zenith of wealth and power came earlier than that. It 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, Hoi An was a major Portuguese trading centre, in the same league as Macau and Malacca. Chinese and Japanese merchants made its fortune, setting up waterfront trading houses which developed into expatriate colonies. The Japanese, however, disappeared during the 17th century after the Shogunate withdrew into isolation, whilst the Chinese continued to expand. Dutch traders came in and French missionaries appeared, foreshadowing the French colonial takeover two centuries later.

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; remarkably, the original structure of some of these streets remains almost intact. The best houses were made of rare 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. Losing its raison d'etre, the old town began to stagnate – to its eventual advantage.

As in the old days, Duong Tran Phu is the main street. A row of vibrantly ornate temples and clan houses face south towards the river, built by the various Chinese communities of Hoi An. Their full titles ring with the pride of the community: the Assembly Hall of the Fujian Chinese Congregation, for example. Each one has distinct features. The Chaozhou hall boasts finely carved and lacquered wood, the Fujianese revels in dramatic ceramic tableaux of mythical beasts, the Cantonese has an imposing covered gateway.

Still more intriguing is the business end of old Hoi An. The trading houses that have been lovingly kept or restored are the places where the merchants did their deals, counted their money, often kept their goods and lived with their extended families. There are several fascinating houses to visit, some still family homes, others turned museums or hotels.

Famously representative, 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 speaks with a strong 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 be well advised to avoid certain saturated markets. Never in the history of man have so many tailors cut so much cloth in so small a space. Rarely have so many galleries sold exactly the same pretty pictures. And nowhere else are there classic Chinese-style lantern-decked restaurants tantalising you at every turn.

I had started my day on Duong Tran Phu marvelling at the concentrated historical beauty, and entranced by the stylish wares on display, but by the end of the street I was suffering from a surfeit of souvenirs. Was it a town or a tourist emporium? I turned down an alley to seek the 'real' Hoi An and out of a little house waddled a naked man carrying banknotes between his lips. By some chance, an official on a bicycle came pedalling up and began berating the nudist, with a familiarity that suggested this might not be the first offence. The man immediately covered up.

The spontaneity of all this totally refreshed me, and fearing things might get even more 'real', I happily went back to check out Tailor No 46 and Art Gallery No 63. A more unique experience was the Japanese Covered Bridge, the only bridge in the old town, built to connect the main town to the old Japanese quarter. Its crusty old pink walls and ornate tiled roof conjure up a cosmopolitan time, a proto-globalisation when Japanese merchants thrived in Hoi An. Now the only Japanese on the streets are tourists in floppy white hats.

Strolling down to the waterfront, you can imagine coolies carrying the goods of Asia, Arabia and Europe on their shoulders. This is where canny Chinese and Vietnamese traders struck hard deals with merchants from unseen lands; but now the counting houses and warehouses are restaurants, cafes or bars, lantern-lit at night, thronged with tourists resting from their more modest exertions and transactions.

This riverside is the favourite hunting ground of a common Hoi An species: the ocarina vendor, usually a small girl. The brown ceramic whistles are always animal-shaped; tortoises are most common. Unable to resist the kids' forceful salesmanship, I had a whole orchestra of ocarinas by the time I left.

They start them young here, and Hoi An's commercial future is clearly assured – if not quite as the ocarina vendor's ancestors might have imagined.