RANGOON: Burma is supposed to be poor and oppressed, but you would have trouble believing it at the Dynasty. Recently opened on the roof of a concrete office block, Rangoon's most fashionable restaurant and night-club is seething with noisy revellers and new money. Not content with spending the equivalent of a government minister's monthly salary on an indifferent Chinese meal (the menu includes the delightful but mysterious Hot and Sour Mutton Fighting Ball), the Dynasty's nouveaux riches diners cheerfully flaunttheir remaining banknotes and stuff them into the hands of the gyrating female singers on stage. Mandalay, 550 kilometres to the north, looks even richer. Japanese cars cruise the streets; shops are full of colour televisions, hi-fi systems, fake Ray-Ban sunglasses from Thailand, fancy watches and torch-clock-radios; the market stalls are groaning with toys and textiles from India and China. Neighbouring China is the key to Burma's new veneer of affluence. For the past four years the generals in the Burmese military junta known as the State Law and Order Restoration Council (SLORC) have gradually freed the economy from government control, tolerating the black market, liberalising trade with China and giving free rein to the ethnic Chinese entrepreneurs who dominate business in Burma as in the rest of Southeast Asia. The SLORC has also struck deals with the warlike tribes on the frontier. The chief architect of Mandalay's free-wheeling economic policy is General Tun Kyi, who until recently was the region's all-powerful military commander. Even the fiercest opponents of military rule admire his achievements. Mandalay, after all, has long been regarded more as a sleepy repository of Burmese culture than as a business hub. ''Tun Kyi is the godfather of Mandalay,'' says one Burmese businessman. ''If the city needs an electric generator he has it imported from China and then calls in the merchants and tells them to pay their share.'' In return, of course, the government turns a blind eye to the more dubious business practices of the merchants. ''The point is, it works,'' says the businessman. The free-trade boom has spawned a generation of flashy black marketeers; they smoke imported 555 cigarettes and drink Changlee beer, brewed in the Chinese border province of Yunnan, or Heineken from Singapore; they boast of their ability to buy police chiefs and immigration officers. One such free trader explained how he exported gems and jade to China in exchange for Chinese cassette players masquerading as Japanese brand-name products. Mandalay, he declared, ''will be like Hongkong in three years''. At first glance it looks as though everyone is profiting from the boom. The citizens of Mandalay say Gen Tun Kyi has repaired the market and beautified the town; the Yunnanese have found a short and convenient trade route to the sea, and China is investing in the repair and construction of Burmese roads and bridges. The Burmese junta, isolated by the West because of its miserable human rights record and its failure to release Ms Aung San Sun Kyi, the detained opposition leader who won the 1991 Nobel Peace Prize, has found a powerful friend in China. Chinese arms salesmen are among those who frequent the bars of Rangoon. But prosperity and the fragile peace on the border have come at a price. Guerillas of the Wa and Kokang hill tribes, who are closely related to the Yunnanese over the Chinese border, have stopped fighting the Rangoon government, but only on the understanding that they are allowed to carry weapons and trade in opium from their strongholds in the Golden Triangle. The SLORC, mindful of the Burmese nationalism to which it constantly pays lip-service, has recently sought to moderate the spread of Chinese influence and to exert more control over the border trade. Gen Tun Kyi has been recalled to Rangoon, ostensibly to become trade minister, but actually, diplomats believe, because his military colleagues feared he was becoming too powerful in his Mandalay fiefdom. Gen Tun Kyi and his Chinese friends, however, seem to be holding their own. Although he has been theoretically replaced as military commander of the central region, he is still occasionally referred to as the commander by the official press. And in the karaoke bars of Rangoon, they are singing songs in Chinese.