"When I first came here I thought everyone was staring at me, and it made me feel very bad," said the young Shanghai woman in hospital garb, trying to explain why she sought psychiatric care.

At that, about 20 Americans crowded into her therapy room, including Secretary of Health, Eduction and Welfare Joseph A. Califano, stared at her.

A unique tour of U.S. health and eduction experts through China had finally come to the hazy area of mental health, where Mao and Freud seem unable to meet. The late Chinese Communist Party Chairman Mao Tse-Tung and his successors, even the little band of Chinese psychologists now returning from political limbo, roundly denouce Sigmund Freud.

At the Shanghai Psychiatry Hospital, Califano and crew took a look at the Chinese approach. They were greeted with patient's applauding, performing ballet, undergoing acupuncture and playing an improbable band version of "Oh, Susanna."

"There are much fewer old people," Califano told his host, hospital psychiatry cheif Dr. Xia Zhenyi. He explained how elderly people filled many similar hospitals in the United States.

Dr David Hamburg, director of the National Academy of Sciences Institute of Medicine, added: "The social condition will certainly dictate what kind of population you find in mental hospitals, and the Chinese seem to be willing to absorb the elderly, into their society better than we do." He noted how many retired Chinese still lived with their children and carried out family responsibilities such as caring for grandchildren.

Xia is a jovial 65-year-old who worked at the Payne-Whitney Psychiatric clinic in New York in the 1940s.

He told Califano that about 80 percent of his patients were schizophrenic. This is a far higher proportion than found in the United States, where many people suffer from depression, a form of mental illness different from schizophrenia.

The American doctors sought an explanation for the proportional difference, but none seemed to satisfy them. A Chinese breifing paper suggested it might be due to "the elimination of drug addiction," such as opium, in China.

Xia said he treated patients with antisychotic, antidepressant and antianxiety drugs, similar to those used in the United States in great quantities. "We also use electric shock and insulin shock and have introduced acupuncture treatment and Chinese traditional medicines," he said.

He said insulin shock was used only in highly schizophrenic cases. Hamburg said the Chinese used electric shock more often than American hospital but said they used lower doses of drugs. "They say they can do this because they keep the patient longer than we do, two to three months compared to our two or three weeks."

The hospital has about 1,000 inpatients and another 500 outpatients a day, most coming in to get their drugs. Califano saw several rooms full of patients in clean but dingy hospital pajamas, making doll faces in one place, match boxes in another. Some looked vague or distracted, but they usually applauded when the American arrived. There were no patients in straitjackets in sight. A visitor to another mental health clinic here said he saw one person under restraint.

"I was very afraid of coming to a mental hospital," said a middle-aged woman in the group therapy session witnessed by Califano. "But now I know everyone is my friend and the doctors take us to see films and television or on long walks and I feel better staying here than staying at home.

The group made no mention of Chairman Mao or the government's love for them, a political message that Hamburg said popped up constantly in a similar group session he witnesses in 1972.

There was also no mention of unhappy childhoods. Psychiatry - and reemerging psychology - professors teach Freud to their students only so they will be able to criticize him. The hospital has 92 psychiatrists, but only two psychologists, who follow a very behavior discipline.

The patients put on a show at the end, with dancing, singing and a band composed of erhu (two-string viola), dian, "I imagine you don't get many visitors here," said Califano. "Actually," said Xia, "we've had 16 American groups in the last four weeks. We hope Mrs. Carter will come someday. CAPTION: Picture, HEW SECRETARY CALIFANO . . . tours Shanghai pyschiatric hospital