Tiny enclave to return to Chinese fold. Portugal agrees to release Macao to Chinese rule by century's end

The tiny colony of Macao, off China's southern coast, has moved one more step away from 400 years of Portuguese control. Portugal and China signed an agreement yesterday providing for Macao's return to Chinese sovereignty. This leaves Taiwan as the only territory claimed by China that Peking has not successfully negotiated back under its control.

According to a communiqu'e issued jointly by Chinese and Portuguese officials in Peking yesterday, Macao, located 40 miles from Hong Kong, will be returned to the mainland on Dec. 20, 1999.

This will be just over two years after Hong Kong, another British colony, is to complete the same process. Further details of the agreement are scheduled to be released Thursday, when representatives of both nations are scheduled to sign it.

Peking has already indicated, however, that Macao will enjoy the same political and economic status as Hong Kong, which is to rejoin China under a ``one-country, two-systems'' formula devised by Deng Xiaoping, China's paramount leader.

Chinese officials have long advanced both Hong Kong and Macao as models for the eventual recovery of Taiwan, which is widely viewed as the prize of China's lengthy reunification campaign.

Given this consideration, according to Western diplomats, Chinese officials have been clearly anxious to conclude talks with Portugal as swiftly and smoothly as possible. Hitches in the discussions on Macao would thus have detracted from Peking's effort to display a measure of political and diplomatic pragmatism.

Talks between Chinese and Portuguese officials stalled briefly last week over the question of nationality for the estimated 400,000 residents of Macao, the vast majority of whom are ethnic Chinese.

Portugal was reportedly requesting dual nationality for the enclave's 40,000 Macanese - those of mixed Chinese and Portuguese blood or parentage.

China does not normally recognize that status. It is unclear what accommodation has been reached between the two sides.

China originally sought to regain control of Macao along with Hong Kong in 1997, and it has insisted that the territory revert to the mainland before the end of the century.

Portugal, however, has been bargaining for a date beyond 1997, chiefly because it claims it requires more time than Hong Kong to develop a local administration.

Efforts to draw local residents into the government bureaucracy have been launched only over the past several years.

China now expects to ratify the agreement at a session of the National Peoples Congress that is scheduled to start in Peking tomorrow.

The facts on Macao Population: Estimated 400,000 - 98 percent of whom are Chinese. Area: The two islands, linked by a peninsula to mainland China, are six square miles. Economy: Main exports are light industrial products, mainly textiles and toys. Exports were $1.10 billion in 1986; imports were $935 million. A major source of revenue is tourism. History: Macao, the first European possession on the Chinese coast, was occupied by Portugal in 1557 as a base for trade with China. Lisbon held the territory under an 1887 treaty with China. But in 1951, Macao was declared an overseas province of Portugal.

After Portugal's 1974 coup, Macao was redefined as Chinese territory under Portuguese administration. Lisbon withdrew its troops. Last June, formal talks began on the handover of the territory to Chinese rule.