She has no illusions about the city. Shanghai ('mud flats') is no transplanted piece of Victoriana. In her book, she surveys - with great merriment - pimps and gangsters, opium merchants, billionaires, self-proclaimed saints (those American missionaries, for whom she has little use) and joyous sinners, which make up most of the population.

Shanghai: Rise And Fall Of A Decadent City (not her first choice of a title, though it works) does give a history. But between Shanghai's bumptious beginning, its Gold Rush mentality, and the final chaotic close in 1949, she has a wild time in telling the tale.

'Oh, it was certainly turbulent,' she explains. 'But between all the rebellions, between the Boxers and the Taipings and those surges of immigrants, Shanghai always had style. The first time I went, in 1988, everybody was still wearing those drab blues and greys. But even here, Shanghai had nuances and appreciated things that were different.

'I remember one day wearing my Laura Ashley dress and green stockings. Now in other parts of Asia, they would have simply averted their eyes. Here, some woman carrying two baskets on her shoulders, took a look at those stockings, literally dropped those baskets and couldn't help staring.

'Then, Shanghai was something like a ghost town, like a place caught in a time warp. But I could still feel a spirit. And not just the spirit of the Westerners who took over the town. It was the spirit of all those people - from all over China, the Sephardic Jews, the immigrants from around the world which gave Shanghai its life.

'I used to hear that it was the Europeans who built up Shanghai. But they simply pushed their papers around. It was the compradores, those aggressive pushy Cantonese who ran the businesses. It was Chinese labour. And when it came to opium - well, Jardine and Mattheson ran the first boats. But when they left, the Jews from Mesopotamia, like the Kadoories and Sassoons, brought in the opium.' Dong hardly started out as a Shanghai expert. As a second-generation American (her parents were from Canton), she went to Chinese-language school in Seattle, but her main connection with China was the food. 'My father,' she says with pride, 'not only had a great restaurant, but he was known as the best chef in all Seattle.' The Chinese connection was slow in coming. At about the age of 13, she decided to be a journalist and study at the Columbia School of Journalism - both of which she did. This was after a year in college in Los Angeles and then Wellsley College - the home of Hillary Clinton, Madame Chiang Kai-shek, Madeline Albright 'and Ali McGraw', adds Dong.

'When I was there, I was thinking of Ali McGraw. I really didn't have much of an idea about the Madame at all.' After a year in Columbia, Dong moved to New York, worked for Rolling Stone ('Fun, but no future') and Publishers Weekly ('I learned so much about the publishing trade, but more and more wanted to write'), and then started freelancing.

'Then I went to China, my first trip, for a story on Suzhou for Travel And Leisure. And to Shanghai. And that's when the idea of a book began to gel.' In 1988, Dong had been experimenting with a novel, as well as a book on the Soong Sisters. Twelve years later, the novel is still in a transitional stage. And Sterling Seagrave's book on the famous Soong family put a stop to the second idea.

'Shanghai, though, was accepted right away. By Doubleday. And then Doubleday was bought out, and the book went out with the new owners. My agent sold it to William Morrow. They changed the title, but the book is ready.' What started as a primordial idea for the story of a city took on a new enthusiasm as Dong went through the archives. Then came interviews with experts, another trip to Shanghai and the joy of meeting the people.

'I was guest of the Shanghai Academy of Social Sciences,' she explains. 'I went with an interpreter, and I met everybody. The actors, the prostitutes, the merchants, the labourers. I talked with so many people of the old days. I spent a wonderful day with the late Lawrence Kadoorie, who explained to me about all the joy of living in those days.

'And then I began to understand just how Shanghai got its style. And I mean style. Elegance. The Europeans and Chinese lived in different parts of the city, yes. But when they got rich - and everybody expected to get rich - they lived it up in style.' This is described in infinite loving detail in the book. She discovered the most meticulous details (like how the first Kadoorie, father of Hong Kong's famous brothers, was a passionate tango-dancer). But she doesn't omit the essential changing demographics. With each Chinese rebellion, fearful rural Chinese would take refuge in Shanghai. With the Russian revolution and German Nazism, sophisticated Europeans would also flee to China and its single unrestricted metropolis.

Her story about Charlie Soong, the one-time cabin-boy and young missionary, who fathered the great Soong Sisters, is remarakble. But Dong's favourite character is typical of her love of the flamboyant.

'Oh, I fell in love with Tu Yueh-sen,' she says. 'He was the tsar of the Shanghai underworld about 60 years ago. Savage, mean, so powerful that at dances, half the Europeans would cross the dance floor to genuflect to him. Yet he was still deemed a philanthropist. He still helped to arm China against the Japanese, he was a patriot. He was, like all Shanghai people, clever. He knew that if he wanted to do something, he could do it.' The story of Tu would make a movie-maker such as Francis Ford Coppola or Martin Scorsese drool. Totally illiterate, he came from a peasant family to Shanghai, joined the police (the best route for gangsters, of course), began to run the opium trade, then the prostitution trade, then the trade trade, until he ran the whole city. He controlled everything until the Japanese were about to invade, when he went into philanthropy.

'Of course he was a gangster,' admits Dong, 'but he understood the relationships between gangs, philanthropy, business, patriotism.' After almost a decade of research, Dong put Shanghai to bed. It also meant she was able to return to the new Shanghai at the beginning of March. With much trepidation.

'As a historian, I stand in awe of old buildings, and I knew that Shanghai had taken down most of its great architecture. But it was still a wonderful revelation. The same spirit of the old Shanghai was still there. Foreigners and Chinese are working together, they think that nothing can stop them.' 'You know,' she says, 'sometimes Hong Kong and Shanghai are both about commerce. But I always felt that Hong Kong has a drabness to its style, like it had just put on a costume. But Shanghai is an evolving city, possibly a city I can live in after New York.' What next for Stella Dong? She may finish her novel, she may write more about Shanghai. Interested in the position of women, she may research a book on the evolving position of women in China and Asia.

'Growing up in America, I am American. Going to China, I began to find things parts of my family history which I had never realised. And in a way, Shanghai is something like me. Half Western, half Chinese. Not ready to make up its mind which is better, but always ready to somehow burst ahead into the future.'