Macao: China's test-case takeover. Hong Kong, Taiwan watching closely how Peking handles the Portuguese colony's return to Chinese sovereignty

This tiny Portuguese enclave on China's southern coast today assumes a diplomatic role far beyond its practical significance. Once the center of Europe's presence in Asia, Macao is now of little political or economic benefit to either Portugal or China. But today's opening of Chinese-Portuguese talks on Macao's return to Chinese sovereignty comes at a crucial moment for Peking.

The two-day negotiations in Peking coincide with China's increased effort to develop contacts with Taiwan, the only other Chinese territory for which reunification is still to be negotiated. They also come a year after Britain and China ratified a pact returning Hong Kong to the mainland in 1997, when Britain's leases expire.

In effect, the Macao talks mark the midway point in Peking's long campaign to reassert authority over traditionally Chinese territories outside its control. As such, the meetings are viewed as a showcase -- to reassure the Nationalist government in Taiwan and to help quell Hong Kong's lingering anxieties over China's true intentions.

``Peking is looking for a tidy solution with the same deadline as Hong Kong,'' a Western analyst in that British colony says. ``And because this should be relatively simple to achieve, Macao is the perfect place for China to demonstrate its sincerity.''

Reflecting this concern, China has mounted a visible effort recently to build confidence among Macao's 400,000 residents and to avert the atmosphere of tension that surrounded the opening of Sino-British negotiations on Hong Kong in 1982. Among other things, China has begun to monitor public opinion in Macao through the Nam Kwong Company, a mainland-owned trading concern that also acts unofficially as Peking's embassy here.

In Portugal, President M'ario Soares's government is handling the Macao talks with equal care, Portuguese sources here say. Lisbon is anxious not to repeat its experiences in Africa a decade ago, when Portugal's precipitous withdrawal from its African possessions left them in near chaos.

Diplomatic observers thus anticipate virtually no major difficulties in Macao's eventual return to the Chinese fold. The issue of Chinese sovereignty, which preoccupied British and Chinese negotiators several years ago, has already been resolved.

Informed analysts hold there was a secret protocol on Macao attached to the treaty establishing ties between Lisbon and Peking seven years ago. Portugal now insists that the meetings in Peking are not negotiations, but ``conversa,coes'' (conversations). Also, the Macao issue is to be settled by a formula already familiar. Chief Chinese negotiator, Deputy Foreign Minister Zhou Nan, confirmed recently that Hong Kong's ``one-country, two-systems'' agreement, which provides for a 50-year period of political and economic autonomy, would also be applied here.

``Compared to Hong Kong, the Macao issue might take less time,'' says Mr. Zhou, who also headed the Chinese side in talks with Britain.

Despite its evident sense of confidence, China faces some significant hurdles in Macao on a more practical level. Chief among these is the wide gulf between the colonial administration and the local population, 98 percent of which is Chinese.

In contrast to Britain's handling of Hong Kong, for instance, Portugal has never tried to bring local Chinese into Macao's bureaucracy among the Portuguese and Macanese (those of mixed Chinese-Portuguese ethnic background), who dominate the civil service. Less than 1 percent of non-Chinese are fluent in the local Cantonese dialect. Typical of the division between the two communities, Portugal has never succeeded in taking an accurate census here. After the last attempt several years ago, Chinese community leaders provided a population estimate based on the local consumption of rice. It was officially adopted.

Under Joachim Pinto Machado, Macao's just-appointed governor, the administration is now translating local law into Chinese for the first time and will shortly introduce a ``localization'' plan for the civil service. But Portuguese negotiators are still expected to ask China for an extension of the transition period beyond 1997, the date Peking is known to prefer.

``In a few years there will definitely be more Chinese in the administration,'' says Jorge Neto Valente, a prominent Portuguese lawyer here. ``But the whole process will take time. So why stick with 1997? In Macao, no such date applies, and we need more time.''

Negotiator Zhou indicated recently that the opening round of talks is expected to set a date for the transfer of sovereignty and determine if a new constitution is to be written. But Peking's flexibility in addressing specific problems is likely to be crucial, diplomats say, if the takeover is to succeed as a display of good faith for both Hong Kong and Taiwan.

In part because Macao is substantially less important to China than Hong Kong, most Macao residents accept the fact that Portuguese negotiators will have little bargaining power in Peking. Although this has produced a sense of resignation here, beneath this lies the same anxieties that still plague Hong Kong.

``We all know what is going to happen and how the future is supposed to be,'' says a local business executive. ``But we also know that it is unlikely China will be able to resist intervening here.''

Signs of this are already apparent. China's commercial activity here has accelerated dramatically this year -- a trend few analysts view as conducive of a hands-off political policy.