THE Grunge School of Chinese Restaurant Selection is alive if not well. This is the discipline which says that evidence of things sanitary or Chinese or graceful in a Chinese restaurant indicate that the restaurant has appalling Chinese food. You know the form: ''Sing Fat Sing? What an awful place! Chinese lanterns all over the ceiling. English-language menus! The waiters wear uniforms! and describe the recipes. Obviously the food must be terrible.'' Next comes the recommendation: ''If you want really authentic food, try this little place in Mongkok, overlooking the sewer. The plates are cracked. The chopsticks are splintered. Instead of a bill, they count the stains on your napkin. The manager is Oscar the Grouch. It's the best restaurant in town! It's the real thing.'' Which it isn't. This is not to say that a few grungy restaurants don't have praiseworthy individual dishes. But for the most part, Grunge by itself is hardly the criteria for satisfactory dining. Nonetheless, a restaurant as dazzling as Hei Fung Terrace inevitably creates suspicions. Walking up the driveway and the 80-year-old stairways from Repulse Bay Road is such an impressive experience that one suspects mediocre food might make up for the visual joy. The stairs, once leading to the open verandah and the finest Sunday buffets in Asia, now proceed to an enclosed European restaurant. Through here, up a floor in the lift, one goes through a labyrinth etched out in rustic loveliness. Suzhou-style wooden windows which peer down on to the open piazza below. Bushes and plants glistening below the waterfalls. (Actually the waterfall falls during the day, rarely at night.) Relatively massive stone cliffs rise where the garden of Repulse Bay used to be. A cobblestone walkway leads to the restaurant itself. This is decidedly not grunge. The 50-metre-long restaurant seems to go into a rock garden, but this, again, is an illusion. All is enclosed. But the enclosure works. Hei Fung Terrace is supposed to look like a Suzhou-styled pavilion in a Suzhou garden, suitable for about 150 guests. And the illusion actually is successful. Around the cashier's desk are examples of chinoiserie, paintings etched in blue glass. The aquarium is lit up with fish so iridescent that one hates to think about eating them. In other corners are old Chinese paintings enclosed in black frames. A usually sagacious friend warned me that the food wasn't that good - but I think he was suffering from Moderate Grunge Symptoms. Since the Peninsula manages the restaurant, the food is actually as imaginative as the design. My guest had been here before for the lunchtime dim sum, and commended the dim sum carts. Each lunch, Hei Fung makes about 20 dim sum. Some of the descriptions are rather obscure (would you believe steamed farinaceous rolls with shrimps?). Others, like steamed meat balls with shark's fin or sweetened glutinous rice dumplings with sesame paste, are more appetising. Four menus come with the dinner. First is a page with chef's recommendations. Next is a short menu with monthly specials. The large menu has the regular Cantonese dishes, with a ''Peking and Szechuan Specialities'' section . One essay into the north wasn't very successful. This was pigeon, baked with tea leaves served with ''little pancakes''. Tea leaves can be very subtle - so subtle, in fact, that the pigeon was dry, the tiny pancakes uninteresting. W E had little else to fear. The Cantonese selections are imaginative and interesting, and it was difficult choosing. To help with our musing, though, the wine menu looked good. A short selection, without outrageous prices. The Puilly Fuisse was $330, the Nuits-Saint-Georges $580, and a recommended Australian wine, Krondorf Chardonnay at $230. But since this was a Cantonese meal, we took the fine hot Hua Tiu Chiu rice wine at $100. It isn't to everybody's taste, but it seemed to work here. Aside from the pigeon, our choices proved excellent. First came the beef with honey and black pepper. These were tender slices, with a few onions. The honey wasn't as distinct as the black pepper. But Hei Fung does make its own XO sauce, with sweet ginger, peppers and vinegar. A bit on the beef brought out all the sweetness. Next was a seafood basket with chillies from the Szechuan portion. Here were plenty of scallops, squid, shrimp and prawn, all braised with green and red mild peppers, in a sauce which wasn't too oily. Third was a vegetable dish. Listed is fresh asparagus, sauteed with turnips, baby corn and mushrooms. We inquired about the mushroom, Straw mushroom wasn't to our liking, and the headwaiter immediately agreed to substitute dried black mushrooms. The dishwas lovely, the asparagus really were fresh, the turnips and carrots scooped into twee little balls, and the taste appealing. After the meal, the dessert main came with the usual red date soup et al. Still, my guest found the mango pudding, and I settled for some honeydew melon. The bill for the entire meal was $685, including the wine and service. Had we wanted to go hog-wild, we could have plunked for the shark's fin or abalone, which take up the first few pages. But there is no reason for that. Choosing carefully, the less expensive dishes are beautifully prepared and appetising to the taste. As for the Chinese wine, I happen to be a greater admirer than my guest. Still, he acquiesced to my choice, and we both had the right buzz for our exit. A walk through the stylised garden pavilion, a stroll down the hallway looking at the piazza fountain through the old windows, and a descent into the reality of a moonlit Repulse Bay. Hei Fung Terrace. 1/F, The Arcade, The Repulse Bay, 109 Repulse Bay Road. Tel: 812-2622. Hours 11.30pm-3pm; 6.30-11pm