'Police have been banging at the door, asking for information on visitors. I keep the door shut now. The tourist season starts properly on April 1, and if the [travel] ban and the troubles continue, I'm in for a bad year. Last year, the government raised taxes, so it's a tough time.'

Mr Ma said a fellow hotelier who caters for mainland tour groups had seen his bookings slashed as tour operators cancelled visits.

The streets are quiet in the small plateau town of 120,000 - of which two-thirds are ethnic Naxi and Han Chinese and the rest Tibetan. Only a handful of foreign and mainland tourists who have travelled the five hours by minibus over the mountain passes on poor roads from Lijiang frequent the many cafes, hotels, restaurants and shops.

Early yesterday morning, the chanting of newly arrived People's Armed Police members undergoing anti-riot drills on the steps of the public library broke the eerie calm. Platoons dressed in fatigues and riot helmets patrolled the streets on foot or in trucks, while regular police in riot gear were also on the beat.

The armed police have set up a command post in the library square and commandeered the gymnasium and cinema.

Sentries are posted at the makeshift iron barriers, and from a vantage point on a hill above the town, more than 60 vehicles could be counted, including an engineering corps and field ambulances.

Outside the walled Ganden Sumtseling Gompa Monastery, an unmarked surveillance van with several cameras monitored the movement of monks and the few tourists.

'We're all worried what this means. We need a good year,' said Mr Ma, a member of the Bai ethnic minority, who with his girlfriend, Yao Jian, of the Shui community, has run a guesthouse in the town for five years.

'But I do feel safer with the soldiers here after seeing Chinese being beaten up in Tibet and Gansu .'

Hotels and travel agents in Kunming , the provincial capital and the gateway to Shangri-la, were told last week to stop selling air tickets to foreign tourists.

'The authorities have told us we're not allowed to sell plane tickets to Shangri-la to overseas tourists,' the travel agent at a four-star hotel in Kunming said. 'Four Britons and two Italians were forced to cancel their pre-planned trip.'

The Post flew to Lijiang and then caught a bus north. More security forces, who had set up roadside kitchens and who drilled in the quadrangles of public housing blocks of a new town, were seen 120km south of Shangri-la. Across the road, Tibetan prayer flags fluttered in the wind.

'We're getting off at Tiger Leaping Gorge. My girlfriend is too afraid to go to Shangri-la,' said a Spanish tourist.

In Shangri-la, a French tourist said: 'It's hardly paradise found at the moment. It feels very bad here.'