This bustling industrial city in China's growing northwest gives this ancient country determined to modernize a peek at its future: a river laced with industrial poison, petrochemical torches lighting the sky and citizens moving through "yellow smog" wearing white gauze masks.

Lanzhou, 760 miles southwest of Peking, has earned a reputation as the most polluted city in China -- the result of a horrible blunder by novice party planners who picked the wrong location for an industrial center. But there are parts of other large Chinese cities with pollution that is even worse. Despite official promises of a nationwide cleanup, most officials reflect the determination of one oil refinery chief here not to cut back on production.

"We have had some criticism from the masses, but this is not an easy problem and we need time," said Hu Yulong, vice director of the Lanzhou petroleum refinery. "In the past we have not paid enough attention to pollution, but we must still increase production. We cannot separate these things."

In their campaign to catch up with the major world industrial economies by the next century, China's communist leaders have stumbled upon a pollution problem that in the past they saw as purely a capitalist failing.

The People's Daily once said: "Capitalists make their enormous profit by rampantly discharging harmful substances into the environment, at will and in complete disregard for the fate of the people."

Now the state council has set up a special environmental protection office that has admitted the nation's major rivers -- the Yellow river which runs through Lanzhou, the Yangtze of central China and the Pearl river in the south -- are "seriously contaminated." It has ordered 167 industrial plants throughout the country, including the massive Lanzhou chemical works, to install antipollution controls by 1982 or face fines, criminal prosecution and shutdown.

"There has been serious damage to our ecology. Improvement of this situation will take some time," the offical New China News Agency said.

It is the kind of tough talk that the Chinese media use in various campaign -- against inefficient work habits, overstaffing of offices and smoking of cigarettes -- that have so far failed to make much headway against longstanding habits of Chinese workers. Shutting down the Lanzhou chemical works would be unthinkable. The plant is the largest of its kind in China, employing 34,000 people and sprawling over nearly three square miles of the city. The Chinese have too great an unemployment problem now to ever consider curtailing such an enterprise.

Instead, Peking appears to be supporting the sort of economic planning that will create industrial growth, with attendant problems to be handled as they turn up. It is an economy run by a group of veterans from the 1950s who first decided to make Lanzhou an industrial giant.

The first five-year plan, from 1953 to 1957, inaugurated the intensive development of this major city of semiarid Gansu province. Planners apparently ignored the existence of a Los Angeles-style inversion layer that trapped stagnant air close to the ground, particularly in winter. Lanzhou had 16 factories in 1949. It has 826 now, creating a potent atmospheric soup of sulfur fumes, nitrogen oxides and dust.

Lanzhou officials say they have plans to modify a smokestack to clean up the yellow smog emitted by the chemical works fertilizer plant. They want to upgrade the company's inefficient sewage treatment plant, now providing only secondary treatment at best. They say they will eventually stop burning tail gas off the petrochemical plant torch -- a fiery smokestack that is a beacon and symbol of Lanzhou seen from miles away. But the antipollution budget only has $6 million which appears to guarantee its low priority.

Peking has publicized severe cutbacks in industry in one city. Guilin, whose sugar-candy hills ands caves have made it a magnet for the growing tourist industry. A Peking paper said that Guilin had received complaints from citizens that the humped-backed hills of limestone were being eroded by acid rains, and that the beautiful, meandering Li river was thick with phenol, arsenic and cyanide. Visitors taking the traditional boat ride down the river had in the past loved to watch trained cormorants, with rings on their long necks, dive for fish at the command of local fisherman. The newspaper reported that 75 percent of the fishing trade had dropped off because of the pollution.

Guilin ordered the steel plant, a power station and a paper mill closed. In other cities, complaints have also reportedly brought some results. In Peking, more than 500 letters were received by the local environmental protection office in the first half of 1979. Two workers living near a chemical plant complained that "we have reached the point where we cannot bear this any longer. We are afraid for our health and that of our children." b

Peking has claimed to have cut its pollution in half by installing scrubbers on 14,000 smokestacks and encouraging families to cook with gas rather than coal. The haze in the city appears to longtime residents to be as dense as ever, however, and coal appears no less popular as the principal family source of fuel. In 1978 China passed the United States to become the world's second largest producer of coal ranking after the Soviet Union.

The Chinese worry about the problem, but production remains the paramount duty, and it is hard to spend much time on an adversary often as subtle as pollution. "We know the yellow smog is bad for everyone," said Jiang Liancheng of the Lanzhou chemical works, "but what of the things we can't see?"