Except for Karl Marx, the most important German contribution to modern China may be the beer that made this city famous.

Tsingdao beer, produced here since kaiser Wilhelm had a brewery built for German settlers in 1903, is China's premier draft. In a society short of delicacies, a bottle of Tsingdao is cherished as Havana cigars or Beluga caviar might be somewhere else.

Tsingdao has moved China's top military man to poetry, has won gold medals and has been dangled as a diplomatic plum. When Communist officials visit this resort city on the Yellow Sea, they go to the old brewery for a little inspecting and a lot of imbibing.

Three years ago, Peking mandated a new system for rendering Chinese characters into Roman letters. Although this city's spelling was changed from Tsingdao to Qingdao, no one dared tinker with the label of a beer now exported to 30 countries.

Few other products of China's colonial past have survived 33 years of Communist rule. European churches and race tracks have been razed. Rickshaws and coolies are long gone. Even street names have been altered.

Tsingdao beer, however, has flourished, with output increasing more than fortyfold since 1949. Even at the dear price of 63 cents per bottle--about half a month's rent for many urban Chinese--supply falls far short of demand.

Like everything else that works well in Communist China, Tsingdao is officially praised as a socialist virtue.

"The purpose of revolution is to raise production to meet the people's demands," declared the brewery's political commissar. "Beer is just one thing people demand. In capitalist countries, the people go on strike because their demands go unsatisfied. That doesn't happen here."

If Tsingdao is truly a symbol of socialism's good living, the fragrant, yeasty brew is enjoyed by few socialists in China. Seven of every 10 bottles are sold abroad, reserved for capitalists who pay hard cash.

Though plans are afoot to double production, the increase would mean "we will give a little more to friendly countries," said brewery liaison officer Zhang Xiying.

Is Tsingdao being used as a diplomatic tool? he was asked.

"The Russians don't get a drop," he replied, grinning.

Tsingdao's formula for success has remained untouched since German beer makers opened the squat, red-brick brewery here almost 80 years ago.

The kaiser's troops occupied this coastal town in 1897 after a German priest was killed by Chinese. The Teutonic presence was a brief and unhappy one for the occupiers who were accused of mistreating coolies and forcibly imposing their European culture.

"If a Chinese was killed by a German, the German had to pay 20 silver dollars," said local historian Lu Hai. "But when a Chinese killed a German priest, the Germans thought it was so serious they took over."

On the kaiser's birthday, the medieval Chinese town was turned into a miniature Munich with fireworks, red banners strung from archways, brass bands, and, of course, flowing beer.

Mixing an old German recipe with the cool, clear springs of Lao mountain 20 miles away, Tsingdao's founders did more to elevate the kaiser's name than anything else in 17 years of German control.

"We have forgotten that the Germans were aggressors," said historian Lu. "Now we only think of them as the country that brought us beer."

Chinese beer makers acquired the skills of their German teachers and continue to churn out the tall, green bottles for a thirsty domestic and foreign market. Other breweries have tried to copy the chemistry of Tsingdao beer to cool what is known in China's cities today as "beer heat."

For those who cannot afford or find Tsingdao, beer is served up "raw" in large plastic buckets at restaurants and parks. Sold by the ounce, it costs about one-quarter as much as a bottle of Tsingdao.

In China, if you're out of Tsingdao, you're not out of beer. Virtually every small city produces it's own draft of widely varying quality, and communes have even begun planning to build their own breweries.

Tsingdao, however, remains the Chinese king of beer, regularly rhapsodized by Chinese officials and foreign visitors. Red Army Marshal Ye Jianying recently wrote a poem comparing it to a famous plum wine of classical times.

Nothing pleased Tsingdao masters more than last year's visit by West German beer makers, who acted as if they had arrived at the fountain of youth.

After entering the plant for the first time, the Germans were offered cups of hot tea, the Chinese custom for welcoming travelers. The visitors asked for beer.

At banquets, the Chinese hosts toasted with the fiery Chinese spirit mao tai. The Germans toasted with beer.

Every night after dinner, the Germans retired with several bottles of the beer.

As the delegation prepared to float off to other parts of China, the leader stopped at the brewery for a farewell visit. He thanked his hosts and sheepishly asked for two more crates of Tsingdao.

"We couldn't believe how much they drank," said liaison director Zhang. "They reminded us they were German and proud of their contribution to China."