It's always Christmas at JJ's Disco in Lhasa, a cheesy Chinese nightclub in the heart of Tibet's ancient capital. Grimy plastic cutouts of Santa line the halls into the cabaret. Neon-colored tassels of tinsel droop from its Greco-Roman columns.

Inside, Lu Zhen, a Tibetan elementary school teacher moonlighting as a nightclub singer, croons to a crowd of Chinese patrons, decked out in three-button suits and ultra-minis, all wielding mobile phones.

"Chinese, Tibetans," she sings as two drunken policemen stagger into the bar, "we are all the daughters of one mother."

Lu's salary at the nightclub is 10 times what she earns teaching Chinese and Tibetan language classes in a ramshackle school across town. "She loves singing and this is the best place in town for her," said a friend. "And with the money they give her, well, it makes it easier to believe the words she's singing."

Forty years after Chinese troops crushed a rebellion against China's rule here, Tibet is at a crossroads -- its soul longing to be rid of China but its livelihood tied ever closer to Beijing. While China pours billions of dollars into developing the spectacular and forbidding region, Tibetans say they have little love for their colonial masters. Despite a campaign of "patriotic education" that since 1997 has defrocked hundreds of monks and closed dozens of monasteries, support for the Dalai Lama, the exiled religious leader who is the campaign's target, remains sky-high.

A two-week trip across Tibet and Tibetan areas of western Sichuan province provided a rare portrait of many Tibetans' desire to escape Chinese influence and the deep economic and other ties linking Tibet to China's fortunes. The first part of the trip involved unrestricted travel and unmonitored interviews in the highland desert of Sichuan province with monks and herders, farmers and car mechanics. Travel inside Tibet was organized by China's Ministry of Foreign Affairs. Some interviews were monitored by Chinese officials but many others were conducted freely -- in the back rooms of bars, the darkened chapel of a monastery, in alleyways and cafes.

Tibet is quieter these days than it has been in years. Pro-independence demonstrations are rare. But the calm masks problems.

A year ago, a rapprochement seemed possible between the Dalai Lama and Beijing. As President Jiang Zemin spoke openly with President Clinton about China's secret contacts with the Dalai Lama's representatives, Chinese strategists floated an image of a multiethnic Chinese empire, of one country with many systems, a federation encompassing freewheeling Hong Kong, ancient Tibet, rust-belt Manchuria and Islamic Xinjiang.

Today the winds are blowing in another direction. Chinese policy in Tibet is now heavily influenced by the war in Kosovo, which fanned Chinese fears that some Tibetans would take up arms against China and win backing from the West. Negotiations with the Dalai Lama are broken off, and the Chinese approach seems to be to let the 64-year-old religious leader die in exile in India. But this strategy could bury the last chance for a peaceful solution to one of China's most vexing internal problems. The bespectacled Nobel Peace Prize laureate is perhaps the only person who can ensure that Tibetans do not embrace violence, as some young Tibetans in exile are advocating.

In the West, Tibet is framed as a simple issue, the lines of right and wrong so tightly drawn that no room is left for ambiguity. In movies like "Seven Years in Tibet" and "Kundun," the Chinese, toting AK-47s and backed by howitzers, were depicted as invading an independent "Shangri-La" when they occupied Tibet. The reality is more complex. China is an empire struggling to become a modern country. Tibet, as it has for centuries, remains one of its vassal states.

The road from Lhasa to the aquamarine Yang Lake winds past panhandling yak herders shouting for a few Chinese yuan. At an altitude of 18,000 feet, the high desert is punctuated by boulders the size of houses and spreads beneath the white tentacles of glaciers descending from the mountains.

At a bend in the road, Kagong, a pint-sized 14-year-old in tattered clothes, explains his stunted frame in simple terms: "I eat one meal a day."

About 2 million ethnic Tibetans live in Tibet -- about half of all the Tibetans in China. Although 78 percent of the population are farmers or herders, they are unable to feed themselves. China's annual shipments of food aid -- averaging 110 pounds for each person in Tibet -- tide over the region during the barren winter months.

Kagong is lucky; he's in school. His 12-year-old friend, Kaxi, dropped out a year ago because his family needed him to tend the yaks. "He has no future," said Kagong. In the 1990 census, 72.8 percent of ethnic Tibetans over age 15 in Tibet were listed as illiterate or semiliterate -- more than three times China's national average.

About 10 hours by bad road from Yang Lake sits Shigatse, Tibet's second city, on the banks of what becomes the Brahmaputra River as it flows south to Bangladesh. At 13,000 feet, Shigatse is one of the highest cities in the world. Under Chinese rule, its core of two-story earthen houses in the traditional Tibetan style has been eclipsed by Chinese urban design featuring boxy, white-tiled buildings.

In front of a $7 million downtown shopping center donated to Shigatse by the government of Shanghai is a monument to Chinese-Tibetan cooperation: a sculpture showing a Chinese woman from the country's dominant Han ethnic group in a miniskirt and go-go boots holding a "belt of friendship" with a Tibetan lass in traditional clothing. The shopping center is shaped like a ship, a symbol of Shanghai's openness to the outside world. In landlocked Shigatse, this ship doubles as a brothel.

Similar wacky investments abound throughout Tibet. The central government has paired provinces in China with cities in Tibet and pushed them to invest here. The Shandong provincial government built the tallest building in Shigatse -- 10 stories -- for more than $8 million. With its marbled interior, wine cellar, coffee shop and massage parlor, it's already a top hangout for Chinese and Tibetan public officials. "They sign the bills, but no money changes hands. But they won't let us go bankrupt," said Tommy Luo, an assistant manager.

Inside the ship-shaped shopping center, 24-year-old Nima Siwang, a pudgy Tibetan banker with a gold watch, is rolling strike after strike in the state-of-the-art bowling alley. Educated in Sichuan province and with a father in the police, he's one of the beneficiaries of Chinese rule. Siwang stresses he's only in Shigatse for a few years of training before moving to the big time in Lhasa.

"I come here all the time," he says after demolishing another 10 pins while two of his girlfriends coo nearby, "but very few other people can afford it." In a moment of reflection, he conceded that Shigatse might have benefited more if Shanghai's largess had resulted in something more useful, like a water treatment plant or street lights.

Back in Lhasa, Danzen, a truck driver who like many Tibetans has a single name, is the same age as Nima Siwang but inhabits another world. In 1997, Danzen spent a month in police custody after he was turned in for his views on independence. At the station house, police shackled Danzen's hands behind his back, attached a wire to the handcuffs and administered an electric shock. "It was like pieces of meat were falling from my body," he said, speaking in a grungy speak-easy in a muddy Tibetan neighborhood in Lhasa. "I'm ready to die for independence."

But Danzen's view is a textured one. He also praised several Tibetan officials for a recent campaign against police corruption and gambling on Sun Island, an entertainment development on the Lhasa River. "Some of them care about Tibet," he said.

Chinese troops entered Tibet in 1950, restoring Chinese rule after 40 years of Tibetan independence. A year later the Communist Party forced Tibetan negotiators to sign a deal that would guarantee Tibet's autonomy from China as long as it acknowledged Chinese rule. In late 1955, Tibetans revolted against the Chinese when Communist Party members carried their revolution into traditional Tibetan lands in Gansu, Yunnan and Sichuan provinces. The revolt spread to Tibet itself; it was brutally suppressed, and the Dalai Lama fled China in March 1959.

Over the next 20 years, Tibet's religion and traditional ways of life were under almost constant attack. Repression reached a fever pitch during the Cultural Revolution of 1966-76. Gangs of Red Guards destroyed almost every Tibetan monastery.

In 1980, Communist Party chief Hu Yaobang traveled to Lhasa to apologize for "letting the Tibetan people down." But after Tibetans began to demonstrate for greater freedoms, martial law was imposed in 1989 and Beijing's policy changed again, with the emphasis on suppressing dissent. Since then, Lhasa has witnessed 100 violent incidents connected with independence activities, said Lhasa Deputy Mayor Ha Jie.

A few Chinese have dared question Beijing's policies in Tibet. One of those is Wang Lixiong, a scholar and novelist who in 1997 published "Sky Burial," the first critical look at the Tibet policy by a mainland Chinese author in almost 20 years.

"The Tibetan problem portends long-term trouble for China," he concluded in an essay earlier this year. "Unless there is a breakthrough in ideas and methods, China will face it forever." Wang was detained for a month after the article was published.

On the streets of Lhasa and Shigatse, signs of China's domination are everywhere. Han Chinese run the factories, man the bars, do the shoe repairs, even sell the peaches. Official figures say that the population of Lhasa remains 89 percent Tibetan. Most people here estimate the ethnic division at about 50-50 in the city center.

Many Han Chinese in Tibet view their Tibetan neighbors as backward heathens who benefit from China's manifest destiny. Chinese officials speak openly of assimilating Tibetans like the Han Chinese assimilated the Manchus, a northern tribe that ruled China from 1664 to 1911. Today, Han Chinese make up 95 percent of China's 1.3 billion people.

"The Tibetans are lazy. It's only natural that Han people show them how to work," said Li Menghui, a shoe repairman from Sichuan.

The Chinese are pursuing a strategy that banks on economic development to erode support for independence in Tibet -- as it has fostered stability elsewhere in China -- and ultimately bridge the gap between Han and Tibetan cultures. "As long as Tibet develops economically, all problems can be solved," said Sonam Tsering, an economist in Tibet's government.

Meanwhile, Beijing is also relying on its "patriotic education" campaign -- a program that basically aims to sully the image of the Dalai Lama -- to break Tibetans' faith in Buddhism. The Dalai Lama's pictures have been banned in public. And the number of monks and nuns has been limited to 46,000, down from 150,000 before the 1959 rebellion. But Tibetans' deep religious faith continues to imperil China's assimilation policy.

"The government's limits are hurting our religion," said one postulant at Lhasa's Jokhang monastery. "We who are in our twenties and thirties don't have knowledge. The monks in their forties and fifties have been either defrocked, killed in the Cultural Revolution or have gone to India. What is the future of Tibetan Buddhism? I don't know."

"We have enough monks and nuns to satisfy religious demands," countered Nima Tsering, a vice governor of Tibet.

The lack of a long-term solution also plagues the Dalai Lama's government-in-exile. Seduced by the glitzy embrace of Western rock stars, actors and models, the government-in-exile overestimates its international influence, Western diplomats say. To date, no country has recognized the exile government's sovereignty over Tibet. This year, the exile government's main activity will be the publication of a five-year development plan for Tibet based mostly on outdated Chinese statistics.

While love for the Dalai Lama overflows in Tibet, few Tibetans would welcome a return of the corrupt aristocratic clans that fled with him in 1959 and that comprise the bulk of his advisers. Many Tibetan farmers, for example, have no interest in surrendering the land they gained during China's land reform to the clans. Tibet's former slaves say they, too, don't want their former masters to return to power.

"I've already lived that life once before," said Wangchuk, a 67-year-old former slave who was wearing his best clothes for his yearly pilgrimage to Shigatse, one of the holiest sites of Tibetan Buddhism. He said he worshiped the Dalai Lama, but added, "I may not be free under Chinese communism, but I am better off than when I was a slave."

If assimilation fails, other options for Chinese rule in Tibet could bring more radical change. One theory holds that as Chinese society east of Tibet inevitably becomes more open, Tibet, too, will be affected. If Chinese start talking about democracy again, which seems inevitable, Tibetans will ultimately address independence.

In a small temple in Ganzi, in the high country in western Sichuan province, is a large photograph of a smiling man wearing spectacles. The same photograph -- and others like it -- peer from many of the town's ramshackle shops. People have put his face on buttons; they talk about him openly all the time. The man is the Dalai Lama.

No officials can explain why the Dalai Lama's face is allowed to be displayed here and not in Tibet, just a few miles to the west. Despite occasional arrests of Tibetan independence activists in Ganzi, usually monks, conditions generally are better here and in other provinces for Tibetans than inside Tibet.

"Maybe the Chinese believe that because we are in China and not Tibet we are safer," said a 43-year-old monk. "It is not happy here but I believe it is better than in Lhasa or other places over there."

China's strange relationship with Tibet is sometimes clearest in discussions with Tibetan beneficiaries of Chinese rule. Take the flexible cultural identity of Lan Qu, the sole Tibetan saxophonist in Lhasa. Educated in Beijing and Shanghai, the 29-year-old musician says he has two personalities.

"I can be Tibetan with Tibetans and Chinese with Chinese," he said. "I've learned to hide."

By day, he plays a traditional Tibetan instrument in the Tibet Song and Dance Troupe, pulling in about $150 a month. At night, he jams at a microbrewery owned by a Chinese entrepreneur who pays him three times his day job's wages.

Lan Qu's 5-year-old daughter is learning both Tibetan and Chinese in kindergarten. He is planning to send her to China for schooling, like most of Lhasa's elite youngsters. "Her future is with China," he said. "Just like mine."

For Tibetans who dream of competing with the Chinese rather than becoming more like them, progress is an uphill battle. School curricula are outdated and do little to prepare Tibetans for the working world. In Tibet's entire government, only five people work on vocational education.

Yet the dream persists. Tashi Tsering returned to China in 1964 from graduate studies in the United States drawn by an idealistic impulse to help his people. After being thrown in jail and branded as an American spy, he reemerged in the early 1980s in Lhasa and began work on promoting rural education. He started a charity that since 1991 has built 46 elementary schools in Namling, a county of 70,000 where Tsering was born.

Tsering's autobiography, published in the United States in 1997, tells the story of a man who performed as a dancer in the court of the Dalai Lama, was the unwilling lover of an elderly monk, a small-time government functionary in Lhasa before leaving Tibet in the 1950s to become a graduate student at the University of Washington.

Today, in addition to his charity, he runs a successful carpet business and sells Tibetan books abroad. His patois -- vernacular American liberally spiced with Chinese -- reveals a man comfortable in three worlds: Lhasa, Beijing and Washington, D.C. "I'm a liberal," he said. "And a good businessman, too."

Tibet's entry into the rest of the world will be a key to its survival, he said during an interview in his cluttered Lhasa apartment: "There is a big competition going on around us in commerce, trade, even shoemaking. Unless we can compete with the Chinese we cannot survive."

In Tsering's living room there are two altars. He says one belongs to his wife, Sangyela. It features the Dalai Lama, bronzes, prayer scarves and candles. He says the other belongs to him. It displays a photograph of former astronaut Sally Ride and the U.S. space shuttle -- a testimony to his faith in science and fondness for the American way.

Tsering, his friends say, actually worships at both.

TIBET AT A GLANCE

The region:

* Tibet, close to twice the size of Texas, consists of high plateaus and massive mountains. The average elevation is 15,000 feet, with peaks rising to 24,000 feet.

History:

* China ruled Tibet from the 18th century, but it became independent in 1911 under British influence.

* Beijing, under Communist rule, reasserted control in 1951. A Communist government was installed, revising the theocratic Lamaist Buddhist rule; serfdom was abolished, and the land was collectivized.

* A Tibetan revolt against Chinese rule in was crushedin 1959, and Tibet's spiritual leader, the Dalai Lama, fled to India. Tibet was made a nominally autonomous region of China in 1965. The decade-long Chinese Cultural Revolution that followed almost destroyed the Buddhist culture. Economic reforms in the 1970s aided the region, and since then Tibet has become more and more dependent on China.

Population:

* 2.4 million, about 500,000 of whom are Chinese Han. Another 4 million ethnic Tibetans live in adjoining areas long incorporated into China.

Standard of Living:

* Urban population: 11.5%

* 84.4 % of the ethnic Tibetan population is engaged in agriculture, forestry, herding or aquaculture.

* 3.4% of the ethnic Chinese Han population is active in agriculture.

* Only a small area of the land is arable and food production is 500 pounds per person.

* Beijing sends in about 100 pounds of food aid per person each year.

* Beijing subsidizes Tibet with huge amounts of money annually, providing 95% of Tibet's budget.

* Illiteracy or semi-literacy rate: 72.8%, compared with a Chinese average of 22.8%

* Infant mortality rate: more than 65 per 1,000 live births.

SOURCES: Webster's Geographical Dictionary, "China's Minority Populations; Surveys and Research " by Lhang Tianlu and Huang Rongging.

CAPTION: A woman walks past Shigatse's $8 million hotel, the investment of a Chinese provincial government.

CAPTION: In mountainous Tibet, traveling is not easy as a cart heavily burdened with passengers and cargo demonstrates on the road to Shigatse, the region's second largest city.

CAPTION: Kagong is small for his 14 years. "I eat one meal a day," he said.

CAPTION: Three Buddhist monks prepare yak butter tea for about 100 colleagues reciting scriptures at a religious festival.