The dragons danced and jabbed like two hunch-backed boxers, darting in and pulling back from the fire crackers wildly exploding in front of Mon Suey Lee's Suey San Lung Chinese grocery store at 604 H St. NW yesterday.

As the string of thousands of tiny firecrackers dwindled down to its final Pop!, the dragon reached toward Lee through the acrid smoke and accepted a red envelope from his hand, a cash gift for the dragon.

The ritual ended, the 56-year-old, white-aproned, grocer heaved a bucket of water on the smoldering remains of the fire crackers and began sweeping up the tiny bits of red paper which, like shredded poppy petals, littered the grey sidewalk.

Thus was the year of the Serpent welcomed throughout Washington's Chinatown yesterday.

A native of Canton, in mainland China, Lee remembers the dragon's annual appearance from the years before he left his homeland in 1940.

"It's the same here," he said, keeping a watchful eye on the crowd of tourists millin in his store. "They go door to door there too, but there, they go to homes."

Yesterday the dragons - which disbelievers could see were teen-agers draped in colorfully prepared cloth covers and heads - visited the shops, restaurants and social clubs which fill the two and three story 19th century houses along H Street between 8th and 6th Streets NW.

At each stop the ritual was repeated: The dragon would advance on the shop or club, the owner would set off firecrackers, and the dragon would depart with the red envelope. It was, as one observer remarked to another, not unlike a sort of Oriental "trick or treat."

The dragon, explained Lee, "is good luck. They go door to door and bring good luck for the year."

And the red envelop?

"It's good luck money. It's for the bunch of kids - to bring a better year," said Lee, who said the youngsters in the dragon costumes use the money for activities like the Boy's Club, and "don't keep it for themselves." he said he gave about $10."

Several thousand persons crowded into the heart of downtown - usually into the heart of downtown - usually deserted on a Sunday afternoon - to watch the dragons cavort about the streets, hear the fireworks and eat in the restaurants that crowd the area.

Lee, however, was disappointed in this year's crowd, which he said was much smaller than usual.

"If there's good weather, there's more people," said Lee. "it's too cold now.

It was 39 degree when the festivities began at about 1 p.m., but 15 to 25-mile-per-hour wind and threatening, slate gray, skies made it feel much colder.

Those who did make the trip from the suburbs, or other parts of the city, seemed to enjoy themselves, however.

A large mural, painted on a building on the southeast corner of 7th and H Streets and inte ded to depict The Chinese In America: Past, Present and Future, was dedicated and proved a popular attraction.

The McKinley High School band performed from the stage of a showmobile at the corner of 6th and H Street and drew as big a crowd as the dragons.

By far the flashiest part of the show was provided by a restaurant owner who said he paid $1,500 to prepare his greeting for the dragon:

He hired a crane, which was parked in the middle of 7th Street NW and had a 60-foot string of firecrackers extending from the tip of its boom to the ground.

Those firecrackers did not even sound like fire crackers. There were just oo many of them. They sounded, instead, like a flash thunderstorm sounds when it hits and you're sitting inside a car. Deafening.