Displaying unusual restraint, China today said Chinese nationals continue to be driven out of Soviet-controlled Mongolia despite several protests to Mongolian authorities.

"We are closely following the developments," said the Foreign Ministry in its first public reaction since hundreds of Chinese passport holders reportedly were herded onto trains, stripped of their possessions at the border and returned to China in recent weeks.

Diplomats here said the statement was mild compared with the threats usually issued by Peking when its citizens are mistreated abroad.

The analysts said Peking may be deliberately downplaying the issue so as not to upset its talks with Moscow on the proposed pullout of Soviet troops in Mongolia, a Communist nation sandwiched between China and the Soviet Union.

Large numbers of Chinese living in the Mongolian capital of Ulan Bator have been expelled after being given an ultimatum in March to move to remote areas or leave the country, according to diplomats and western businessmen traveling from Mongolia by train.

Travelers on the Trans-Siberian Express in recent weeks have reported seeing several hundred Chinese forced to give up their wristwatches, radios and other personal items before they were dumped at railway depots in north China.

The March edict affects about 8,000 Chinese construction workers, remnants of the skilled labor force sent to Ulan Bator in the 1950s, when relations between China and Mongolia were good.

Relations began turning sour in the early 1960s after the split between China and the Soviet Union. Mongolia, a Soviet satellite, has about 40,000 Soviet troops along its border with China.

Although the exact reason for the mass expulsion remains a mystery, diplomats believe such a large-scale deportation could not take place without Moscow's concurrence.

Chinese and Mongolian officials here have refused to disclose the reason or give the number of Chinese already ejected.

According to Soviet Bloc diplomats, Ulan Bator is suffering from overpopulation and the Chinese are no longer needed for construction jobs. Chinese residents were given a choice: move to state farms just north of the Gobi Desert or go home.

Western diplomats said the eviction order more likely is linked to the gradual thaw in Sino-Soviet relations, a process the Mongolian government may fear comes at its expense.

At the last round of Sino-Soviet talks in March, the Kremlin reportedly invited Peking to open direct negotiations with Ulan Bator on the withdrawal of Soviet forces from Mongolia. China has called for such a troop pullout as one of its conditions for any fundamental improvement in relations with Moscow.

According to one theory, Ulan Bator is trying to disrupt the normalization process by manufacturing an incident that Peking is bound to blame on the Soviet Union.

Another diplomat said the Kremlin might even have endorsed the expulsion to appease Mongolians who fear Chinese expansionism in the event of a Soviet troop withdrawal.

Although Ulan Bator remained silent during early stages of the Sino-Soviet thaw, its state-run media began unleashing fiercely anti-Chinese attacks after the last round of talks in Moscow.

China has not replied and refused to confirm the recent expulsions until today's statement.

"We have made several representations to the Mongolian side over this," said the Foreign Ministry, "but up to this day the Mongolian side still continues to force Chinese nationals to emigrate and drives them out."

In Chinese diplomatic parlance, a representation is a mild protest.

Diplomats noted the moderate tone contrasted with Chinese responses to similar past incidents.

When Vietnamese troops drove ethnic Chinese across the border into south China in 1979, Peking responded with numerous denunciations and warnings. Finally it invaded Vietnam, citing the persecutions as a reason.