Slouching toward a global economic revolution.

As an investment banker, I'm accustomed to interpreting numbers. But it took words to bring home to me just how irreversibly the world's economy has changed.

The words came from the premier of China, Li Peng, who questioned me last year on how he could accelerate his free-market economic program. He asked, "What are the prospects that 22 Chinese state-owned companies will be able to privatize by selling $10 billion to $15 billion of their stock in the U.S. and Europe?"

"Quite good," I replied unequivocally. He then asked me how a certain Chinese steel company could qualify for a New York Stock Exchange listing. Such a conversation - between a Wall Street capitalist and the Communist leader of the world's largest nation - would have been unthinkable a decade ago. Now it signals the revolutionary state of the world's economy.

The adoption of market-based economic systems around the world has dramatically - and permanently - altered the global economy. We've seen it in Latin America, Southeast Asia, China, Russia, Eastern Europe, and India. In North America, we see it with the passage of the North American Free Trade Agreement. Europe also has moved a long way toward a single internal market.

These newly opened markets - for trade, investment, and capital - have brought about two structural changes in the global economy. First, a large, productive, and willing group of people, more than 3 billion, has been incorporated into the world's labor force, more than doubling its size. This labor force already is promoting greater productivity. It will increase dramatically the supply and demand for products. It will help dampen inflation for years, because wage levels in the emerging nations are substantially below those in industrial countries.

Second, a huge amount of private capital, in the form of both debt and equity, is flowing to these economies, allowing them to capitalize fully on their labor force and resource opportunities. The World Bank estimates that the amount of private capital that flowed to developing countries in 1994 was $135 billion, up from just $8 billion five years earlier.

What will be the impact of this world economic revolution? Major corporations in this highly competitive world economy will have to seek - and financial markets will demand - dramatically stronger, more prudent balance sheets, with resultant low financial risk. This will help compensate for the business risk associated with operating in less-familiar territory. And the prospects for sustained low inflation will decrease the benefits of leverage. Even cycles of financial speculation and excess are likely to be dampened because of the heightened concern for balance-sheet rectitude.

To increase productivity and strengthen their economies, governments are selling state-owned enterprises. Italy is the latest example, with a $10 billion divestiture slated for this quarter. As governments rely more on markets, they will adopt sober fiscal policy and accept less-direct control over their own economies. Privatization provides proceeds that can be used to pay off debt, pursue social goals, and build infrastructure - without raising taxes.

Against all predictions, the U.S. - New York, in particular - has become the global marketplace for capital. No other country's market can match the U.S.' ability to distribute massive new issues and provide sufficient aftermarket liquidity so that buyers of size can exit without major impact on their securities' prices. Greater flexibility in U.S. securities regulations for foreign issuers also has encouraged the move to use U.S. equity markets, as has the U.S.' use of disclosure and accounting standards that more accurately reflect the true value of assets and liabilities.

While there always will be ebbs and flows in the amount of capital going to emerging markets, investors worldwide are exploring foreign opportunities to an unprecedented degree. However, these developing countries need new resources in place - not just factories and infrastructure, but banks and capital markets.

Here are three steps you should take to prepare for the global economic revolution:

* Think globally. No, really globally. If you aren't including China, India, most of Latin America, Eastern Europe, Russia, and Southeast Asia in your plans, you are ignoring some of the best opportunities.

* Strengthen your company's balance sheets. Structural changes affecting corporations, governments, markets, and investors will not happen without disruptions.

* Downsize, decentralize, and delegate. Your company needs to allow for rapid decision making and flexible responses to opportunities and threats, no matter where in the world they occur.

John M. Hennessy is chairman and chief executive of CS First Boston in New York, an investment banking firm.