Forty miles west of Hong Kong, this enclave has been an outpost of Europe for half a millennium. This month it becomes part of China

At midnight on the 19th of this month, music will blare, fireworks will explode, cameras will flash, and Macao, Asia's last European territory, will disappear. Four hundred and forty-two years after it was first established, this forgotten but tenacious backwater will cease to be Portuguese and join the People's Republic of China.

No one expected Macao to go out quietly--and it hasn't done so. In 1998, anxious to reverse the six-square-mile territory's image as a racketeer's playground, the Portuguese called in a special task force to crack down on organized crime. Far from bringing peace, the move sparked an underworld turf war. Waged on the fringes of the casino industry, the fighting claimed two dozen lives last year alone. Then there was the senior prosecutor who survived a hail of bullets, and the police commander who narrowly escaped a blast from a car bomb.

Talk about bad PR. Macao's big moment, its proverbial 15 minutes, was being ruined. Foreign reporters began digging into other not-so-pleasant aspects of the enclave--like the fact that it's a major money-laundering center, or that North Korea uses it as a hub for distributing counterfeit U.S. currency.

In Macao, the reaction was: Ho-hum. A little crooked dealing, after all, is a fact of life here. The gunplay was nothing more than a squabble among family members, albeit a particularly shady and dangerous family. (If you aren't a cop or a gangster, the city is as safe as ever.) The revelations of corruption surprised no one. Macao has always been a place where things are arranged behind closed doors and the fewer questions asked, the better.

"In Hong Kong, they're always so worried about democracy," says Isabel da Silva, a 30-year-old Macanese--one of the territory's more than 10,000 residents of mixed ancestry. "Here we're more interested in making money." And money is being made. Forget the Asian economic crisis: money is sprouting in Macao like fungus after a summer shower. Consider the rectangular swaths of landfill spreading out into the muddy waters of the Pearl River; the enormous international airport that appeared off the coast; the forest of featureless high-rises springing up everywhere. Where's all the money coming from?Who knows?Who cares?And never mind that the airport sits virtually idle, or that the high-rises are mostly tenantless even as new buildings push skyward. As Gertrude Stein might have said, money is money is money.

On a map, the peninsula of Macao juts down like a stalactite from the Chinese mainland, with two islands, Taipa and Colôane, spread southward like water droplets. Historically, urban life has always been concentrated on the peninsula, where narrow lanes still bear the scuff and stains of four centuries' use. Through willful oversight or benign neglect, the old Macao remains in force, blocked off behind the waterfront's modern faÁade, slumbering beneath a patina of mildew. How could so many billions have been splurged on the shiny new districts of Macao with barely a drop of fresh paint finding its way to the rest of the place?

There have been gestures, here and there, toward restoring the grandest buildings of Macao's colonial past. On top of Guia Hill, the oldest lighthouse on the Chinese coast is sparkling after a recent makeover. Behind the Ruins of St. Paul--a Baroque marvel, and all that remains of a church destroyed by fire in 1835--a new museum, in an excavated crypt, showcases relics of both Japanese and Vietnamese Christian martyrs, 17th-century paintings, and liturgical ornaments. And nearby, the Museum of Macao has risen amid the ruins of Monte Fort, a Jesuit stronghold built in 1617. Its artifacts trace the city's history and culture, and the topmost level opens onto the fort's ramparts, which afford panoramic views. It would be a great spot to get your bearings if the skein of streets weren't completely hidden beneath the close-pressed rooftops.

A short way down the hill lies Macao's antiques district, an area centered around Rua das Estalagens. Even if you're not in the market for a souvenir, the range of objects provides excellent entertainment. In one store, 10-foot wooden beams from a Ch'ing dynasty temple are carved with ornate battle scenes. Next door, another shop sells figurines dating from the Cultural Revolution, including one eerily giddy montage of four Red Guards humiliating an academic. It's a little too emotionally charged to qualify as kitsch, but at $125, it would make a bargain conversation piece.

Macao has long been a city of ghosts, but pretty soon you won't even be able to see those. The jewel of its hotels was always the Bela Vista, a 130-year-old former mansion overlooking the Outer Harbor. With just eight guest rooms, it was a byword in old-style colonial luxury. To widespread chagrin, the property was commandeered early this year by the Portuguese government for the consul general's official residence after the handover. The bureaucrats' gain is Macao's loss.

"These days, Macao is like a mini-Hong Kong," says Manuela de Jesus Palmer, a 26-year-old who works at the new airport. "We have the airport, we have everything--but somehow we miss the old Macao." With her pale skin, dark hair, and olive eyes, Manuela could pass for either Chinese or European. She is both. Steeped in two cultures, the Macanese served as intermediaries between Chinese residents and Portuguese masters for hundreds of years. Many wonder what role, if any, the Macanese will play in the new Macao. Some doubt that their hybrid culture can survive at all under a Chinese government with little interest in preserving the vestiges of a colonial past.

A search for Macanese food (a blend of Chinese and Mediterranean traditions that seems to be the most significant legacy of the Macanese minority) led me to Riquexó, a no-frills cafeteria that overlooked the aisles of a basement grocery store. From a steam table wafted the smells of Portuguese chicken and tamarind pork with pungent fish paste. The place was run by Lena Santos, who was planning to move to Lisbon with her Portuguese husband before the handover.

"The feeling is mainly one of sadness," Lena said. "Before, I would travel abroad and know I could always return to my roots. Not anymore."

Like many Macanese, Lena viewed the demise of her culture as a fait accompli, yet she was doing what she could to preserve it. When I spoke to her she was staging a comedy written in Macanese. "It's a dying dialect," she admitted. "The younger generation doesn't speak it. In a few generations, no one will understand it at all."

Her melancholy was contagious. Macao isn't a pretty city, but it has true soul, and a sort of underdog charm. And it's been around so damned long. Come the morning of the 20th, that old enclave will be gone, and a Chinese city will stand in its place. An era will have ended--not just for Macao, but somehow for the rest of us too.

The Facts
Mandarin Oriental, Macau 956-1110 Avda. da Amizade; 853/567-888, fax 853/594-589; doubles from $125. Convenient, efficient, and generic.
Pousada de S&227;o Tiago Avda. da Republica, Fortaleza de S&227;o Tiago da Barra; 853/378-111, fax 853/552-170; doubles from $186. A 24-room inn shoehorned into a 17th-century fort.

A Lorcha 289AA Rua do Almirante Sergio; 853/313-193; dinner for two $30. Portuguese and Macanese specialties.
Comida Carlos 28D, R/C, Rua Bispo Medeiros; 853/522-027; lunch for two $20. A local favorite; try the bacalhau, or salt cod.