The young Chinese-American had just stepped out from beneath a dragon's head to smoke a cigarette and look around at the lunar new year festivities in Washington's Chinatown yesterday.

"There's not too many Antionalist flags out," he said as firecrackers popped nearby and other dragon dancers worked to drive evil spirits from the stretch of H Street NW between 5th and 9th. "It used to be every business had one. But not this year... They don't want any conflict."

Even for those who would have liked to avoid it, however, the long conflict between Nationalist and Communist China was constantly in evidence. No one forgot that although those flags in Chinatown were Nationalist, the White House a few blocks away was festooned with the banners of the Peoples Republic to honor visiting Vice Premier Teng Hsiao-ping.

"Lots of us still have family back in China, so we know through indirect communications they lead a harsh life," said Linda Lee of the Jade Palace Restaurant. "This king of hatred we cannot get over overnight."

After the high school marching bands had gone by and the smoke from a 100-foot string of firecrackers had cleared, leaving the street red with exploded paper, most of the 500 or so spectators started drifting away or into the open shops and restaurants.

Most of the spectators were not Chinese. They had come, nevertheless, to see the year of the Ram, the 4,677th year of the Chinese calendar, start off with a festive bang rather than with political pronouncements.

But even the non-Chinese were aware of the political overtones brought on by President Carter's decision last year to sever diplomatic relations with Taiwan and to recognize Peking.

Several children were handed little plastic Nationalist flags. A brief speech by Mayor Marion Barry -- who assured his listeners that the convention center to be erected nearby would not hurt Chinatown -- was followed by a mild address from a representative of the former Taiwan embassy and an impassioned one by former congressman Walter Judd of (R-Minn.) the Committee for a Free China.

Some of the spectators, like Adrienne and Stan Elman of Bethesda, spent their time looking at posters plastered on a wall near 7th and H Streets. One yellow flier pictured Teng with a spilling Coco/Cola bottle in his hand being literally kicked out of China.

"They don't like him very much, that's obvious," said Stan Elman, "but you've got to face the realities of the world."

"It's like families that can't get along toegther," said Adrienne Elman.

Many Chinese-Americans at the festivities yesterday would have agreed.

Most said they would like to see a non-Communist government ruling their homeland, and that they have no love for Teng.

Some political and community leaders, like Franklin Dea Fong of the Chinese Consolidated Benevolent Association, said Chinatown is "100 percent Nationalist territory," as they were passing out flags.

Others placed the figure at something like 80 percent, with most of the rest wanting to stay neutral and only a tiny percentage actually supporting Peking. "Whoever is pro-communist, they are still very shy at this point," said Linda Lee.

But there is almost always the consciousness of being one people, regardless of political affiliations.

Douglas Y. Toy, whose Kowloon Restaurant at 11th and G Streets NW is just a couple of blocks outside Chinatown proper, is one of the few Chinese in the area who openly endorses Carter's China policy.

During a Nationalist demonstratin on Jan. 1 the flag of the Peoples Republic he had flying in front of his restaurant's entrance was torn down and ripped to shreds in front of the White House, but he had it flying again yesterday and siad he wasn't worrried about repercussions.

"You see, they have a different opinion," Toy said through an interpreter. "But we areall Chinese... They have the Nationalist flag, but the official legal one is supposed to be this one." He pointed to another red banner on the restaurant's back wall.

In Chinatown, Toy said, "they have a lot of people that have old-fashioned dreams. There are many flags. What is more important is tho know who we are and what is our country."