Angered by rumors that a Chinese shopkeeper had tortured and murdered an Indonesian servant girl, mobs stormed the Chinese quarter in the city of Ujung Pandang recently, demolishing hundreds of homes and stores, overturning cars and injuring 11 persons.

The Indonesian government denied the murder rumors but had to clamp a curfew on the city and send in the Army to restore order. The conflict typifies hostility toward residents of Chinese heritage who have gained an economically powerful foothold in Southeast Asia.

Clashes between ethnic Chinese and indigenous residents have also occurred in Malaysia, Thailand and the Philippines. Indonesia has weathered at least five major waves of anti-Chinese rioting, looting, arson and even murder in the past 20 years.

Diplomats here say the racial hostility discourages closer ties between Southeast Asian countries and China. Such ties would strengthen the U.S. position against Soviet-Vietnamese influence in the region.

So strong are anti-Chinese feelings that during the height of the exodus of "boat people" from Vietnam last year, that an Indonesian former ambassador to Vietnam remarked: "It must be admitted that North Vietnam is the only country in Southeast Asia which has succeeded in dealing with the problem of overseas Chinese."

He was referring to the fact that an estimated 85 percent of the boat-borne refugees from Vietnam of Chinese descent and most were encouraged to leave by the government.

"The anti-Chinese feeling is getting stronger," said a prominent Indonesian businesswoman, Herewati Diah. A nationalistic backlash has emerged among indigenous populations after centuries of exploitation at the hands of Chinese traders, merchants and entrepreneurs.

Chinese middlemen cooperated with the British, Dutch and Spanish colonizers of the region to squeeze as much profit as possible from lucrative trade in spices, rubber, sugar and coffee. The rights of native plantation workers often were trampled in the process.

More recently, China under the late Communist Party chairman Mao Tsetung provided weapons, supplies and moral support to communist guerrillas operating in Southeast Asia.

China-played an active role in instigating the attempted coup by Indonesia's now-defunct Communist Party in 1965. When the coup failed, Indonesia shut down Peking's embassy in Jakarta. Thousands of Chinese Indonesians fell under suspicion of being involved in the coup or with the Communist Party and some 25,000 are believed to have died in reprisals by the Army.

Now, the ethnic Chinese communitise of Southeast Asia have transformed their centuries of trading experience into a virtual monopoly of the region's business and banking sectors, sparking more resentment from poor indigenous populations.

That dominant role is particularly dramatic in Indonesia. An estimated 4 million ethnic Chinese in a population of 140 million control 80 to 90 percent of all trade.

A 1976 survey in Medan, on the island of Sumatra, found 31 percent of the big businesses, 55 percent of middle-sized businesses and 67 percent of all small businesses owned by Chinese entrepreneurs. And 58 percent of the city's businessmen were Chinese, although the ethnic group comprised only 8 percent of Medan's population.

Chinese exercise even greater control over the economies of Jakarta and the Thai and Malaysian capitals of Bangkok and Kuala Lumpur -- and hence on the purse strings of the entire countries.

Ethnic Chinese minorities usually enjoy a higher standard of living than indigenous majorities. The resulting resentment has been a catalyst for violence and restrictions.

In Indonesia, the Chinese characters that elsewhere decorate the storefronts of Chinatowns are banned.So is importation of printed material bearing Chinese characters. Censors even splash black ink over the calligraphy in the advertisements of Asian editions of Time and Newsweek.

The usually raucous celebrations of Chinese New Year or a wedding pass quietly here. Security agents have been silencing the Mandarin songs that once drifted from the nightclubs of Jakarta's Chinese sector.

The government has also implemented laws that discriminate against Chinese businessmen. New companies must be at least 20 percent indigenous-owned and must train non-Chinese employes for major positions.Government contracts must go to indigenous businesses. Malaysia has similar laws.

"I don't think we are racist. I prefer to call it economic nationalism," said Ruslan Abdulgani, a senior adviser to President Suharto.

"The people at the village level always saw the Chinese traders exploiting them, deceiving them. Any racism is just a manifestation of the experience," he said.

Oddly enough, many leaders of the local Chinese community have been instrumental in formulating the discriminatory government policies.

Harry Tjan Silalahi, a prominent local policymaker whose Chinese ties to Indonesia date back nine generations, said, "It's a wise thing, to do at present, even though it hurts. It could actually prevent a bigger catastrophe in the future."

Tjan and other ethnic Chinese leaders believe the Chinese minority must integrate into Indonesia life. "It can go either way at this point. The country can become a melting pot or break down into ghettos," Tjan said.

One common practice, also popular in Thailand, has been the localization of Chinese names. Tjan has officially added the Sumatran Silalahi to his family's name.

K. Sindhunatha, a businessman once known as Ong Chong Hai, says that such cosmetic assimilation is necessary but some government regulations have gone too far.

I can understand the economic policies against us. Some unequal treatment is necessary in that field," he said. But he noted that there is discrimination in all fields, particularly education.

"They make it difficult for an Indonesian Chinese to build up a career in government fields or to pursue careers in science and education," Sindunatha noted. "That drives many bright Chinese right back into business and banking."

In spite of the laws, some Chinese entrepeneurs act as the financial middlemen for members of the indigenous elite in the military and government.

Liem Sioe Liong considered Southeast Asia's wealthiest ethnic Chinese, has been involved in a lucrative flour mill and in the clove trade with a brother and a foster brother of President Suharto.Cabinet ministers drive in Volvos, costing $46,000 here, assembled by one of Liem's companies.

A highly placed Indonesian official freely admitted that such collusion between the native elite and ethnic Chinese fuels the fires of racial hostility.

Another government practice, withholding of citizenship, has fortified the barriers between ethnic Chinese and the locals. Nearly 1.2 million people, comprising about one-third of all Indonesia's Chinese, have never held Indonesian citizenship.

Residents such as Nurdin Salim, 25, born Afat in Medan, have never been able to obtain an Indonesian passport, own land or work in the government.

Salim supports his family by duplicating keys in a supermarket and has not been able to pay the bribes that have been required from Chinese seeking citizenship papers. He and his wife, also stateless, even had to put up their first child for adoption by relatives who have citizenship documents in order to obtain a birth certificate.

"I love this country but the government has made it difficult for me," he said.

A program instituted by the Suharto government in April theoretically will enable Salim and the other 1.2 million stateless Chinese to register under streamlined application procedures. The government has set a price of about $5 to discourage immigration officials from demanding bribes.

Despite the decree, officials believe it will take at least two years to register all the stateless and some may wind up being deported to China or Taiwan.

The registration program is a preconditon to resumption of diplomatic relations between Indonesia and China. Relations have remained frozen since 1967.

Although China remains a little-known communist country to most Indonesian Chinese, there is concern that renewed relations could change that situation. Said one prominent Chinese businessmen:

"As soon as the Chinese Embassy reopens in Jarkarta, many of the locals may suddenly reorient themselves toward China. This will happen especially if Indonesia continues its policy of discriminating against Indonesian Chinese in all fields so they can never really feel at home here. They would look for the protection of the Chinese Embassy, which would certainly open its door and receive them."