The Communist Chinese understand the Fourth of July but the Consumer Product Safety Commission was a mystery to them.

Explaining the Consumer Product Safety Commission to the Chinese was a tough trick for Washington businessman Milt Dropo.

The Chinese know about the Fourth, because they make fireworks. Two-thirds of the fireworks patriotic Americans will shoot off this year will be made abroad, and two-thirds of those imports will come from mainland China.

Dropo imports a lot of them. As owner of Washington Fireworks and American Imports - with offices in the District of Columbia and Florence, Ala - he has gone to China six times to trade dollars for roman candles.

The trips have become increasingly fruitful for Dropo and his trading partners. Since 1971, when restrictions on trade with the Chinese were lifted, they have boosted their share of the import market from 1 percent to 70 percent, taking business away from Japan, Macao and Taiwan. China sold U.S. customers $6.5 million worth in 1976.

The Chinese have adopted quickly to the demands of the American market Dropo said in a recent interview, turning out new products as regularly as Detroit turns out new cars.

This year's special is somethingcalled "Monkeys Violating the Heavenly Palace." It shoots up in the air and "things" shoot out that look like, well, monkeys, says Dropo, who confirms that fireworks salesmen do give demonstrations.

As their ability to turn out new products suggests the Chinese understand marketing. But they are perplexed by the market regulators in this case the Consumer Product Safety Commission.

"They just couldn't believe that the government would prohibit a company from selling a product," laughed Dropo in a voice that booms like a string of silver salutes. (Silver salutes are banned by the Consumber Product Safety Commission but Dropo still talks that way.)

The CPSC's demand for safer fireworks led the Chinese to put stronger sticks on their bottle rockets, wider bases on their exploding fountains and safer fuses on their firecrackers.

Dropo and the half dozen other importers who trade directly with China, spent hours painstakingly translating CPSC's fireworks regulations for the Chinese.

"Did you ever try to explain what six-point type is to someone who doesn't ever speak English?" asked Dropo, recalling a regulatory low point in an industry that is regulated by nearly every state. Many of those safer fuses on Chinese fireworks, by the way, are plastic-coated and machine-made, the first evidence that mechanization has come to the ancient Chinese art of fireworks production. But neither Dropo nor his fellow importers know for sure.

None of them have ever seen a Chinese fireworks factory.

"We always ask them if we can visit the factory and they always tell us they're too busy and it's too far away," Dropo said, recalling a conversation repeated twice each year when the Americans attend the Chinese fireworks trade fair.

There are four or five fireworks companies in China, most of them making different Products, Dropo said. All, however, are part of a Communist conglomerate, the chinese National Native Produce and Animal By-Products Import and Export Corp. Hunan Branch.

The ancient Oriental art of bargaining is no longer practiced by the fireworks makers said Dropo. Instead they have adopted western-style pricing adding on a little each year because of inflation.

Inflation is about that only growth factor in fireworks which is not exactly a booming business, economically speaking. The U.S. International Trade Commission estimates that total U.S. consumption in 1976 was $22 million, the same as in 1973, despite the inflation.

Mostly that is because of increasingly strict regulation. The CPSC took most of the bang out of the business by banning all firecrackers except ladyfingers-the little ones that can go off in your hand without taking a finger with them.

John Conkling, a chemistry Professor at Washington College in Chestertown Md. who doubles as executive secretary of the American Pyrotechnics Association, said CPSC has made legal fireworks so safe that they now rank 87th on a list of consumer hazards, causing fewer reported injuries than cookware, jewelry, tables or chairs.