It's Sunday morning. The sound of bells ring out from the baroque church in the Largo de Santo Augusthino. Guests in the Pousada de sap Tiago, once a fortress built into the hillside, tumble out of four-poster beds. They make their way along tiled corridors with little wall statues of Our Lady of Fatima, and downstairs to a shaded terrace overlooking a hazy blue sea. They linger overlunch of caldo verde and feijodas, washed down with glasses of Mateus Rose.Life has a distinct colonial charm in Macau, the 441-year-old Portuguese enclave on the south China coast. Westerners living in eastern Asia love to come here for a couple of days to soak up the southern European atmosphere among the cobbled streets, old mansions and avenidas. In contrast to Hong Kong,time moves slowly in the little area containing 427,400 people, which for almost 500 years has served the interests of both Portugal and China. But it doesn't stand still, as residents are particularly aware this week, as December 20th marks the start of the last year before the Portuguese go home and Macaureverts to China as a Special Administrative Region. Its status will be similar to that of post-colonial Hong Kong, that is, it will retain its capitalist ways for 50 years.But it is a very different place from Hong Kong. Until recently, explained the Portuguese ambassador to China, Pedro Catarino, when he met journalists in Beijing last week, "Macau was an isolated, almost forgotten place, whereas Hong Kong was a big cosmopolitan city and an important financial centre." To go from Hong Kong to Macau was to travel from the future to the past, he said. "Living there was like living with your grandparents - in their time, not yours."Hong Kong was well developed, with many British institutions and a strong judicial system with British and Chinese lawyers, but Macau had a tiny Portuguese elite and a small continental-Europe legal system. Sleepy Macau retained many more historical buildings than Hong Kong, while at the same time it was more open to Chinese people.Some 23 million people visited the city last year alone to gamble, shop or work and many walked across from the mainland. Where Hong Kong always controlled its borders, Chinese immigration officials alone decide who can enter Macau. There is another difference. In the last few years before Hong Kong's return to the motherland, both Britain and China concentrated on preserving its institutions and wealth, whereas the emphasis in Macau has been on modernising the city for the moment of handing it back.A new airport has been built, and has opened up Macau, serving 25 cities with 390 flights a week. A 1.3 kilometre "Lotus" Bridge, to be complete next November, will carry 10 million vehicles a year between the 20-square kilometreterritory and the mainland. The results of modernisation are impressive. Today the percentage GNP of US$17,500 (£12,000) is higher than that of Portugal itself.In the last year of its rule, Portugal will try to persuade the incoming Beijing-appointed administration that keeping the character of Macau is the best way of maintaining its new prosperity. Beijing is insisting on promoting Chinese and having an all-Chinese judiciary after the handover, though the ambassador believes it will take some time "before we have Chinese lawyers prepared to assume responsibilities at the high level." While the handover has been smoother than the last days of Hong Kong, there have been other disagreements. The Chinese have accused Portugal of being slow to localise the top echelons of its 17,600-member public service, which Mr Catarino says is now 80 per cent Chinese.Beijing has also accused Portugal of "colonial looting" in transferring large sums of money from Macau to the state-owned pension fund in Lisbon, the Caixa Geral de Aposentacoes de Portugal. Though there have been no Portuguese troops in Macau since the 1980s, China has recently decided to station a garrison in the enclave in an old barracks which now contains a school and other occupants. Macau's likely first chief executive,Edmund Ho Hau-wah, likes the idea, as does casino owner, Stanley Ho Hung-sun, who said: "It's great. In the long term it will help solve the security problems."In the dying days of the colonial era, security has become a big headache, with regular gun and bomb attacks as gangs fight for control of gambling and prostitution which are the foundations of Macau's wealth. Recently things have improved, with only 10 murders this year compared to 30 in 1997. The violence rarely affects visitors, or disturbs the tranquillity of the Portuguese quarters of what is now a largely Chinese city of high-rise apartment blocks.After the handover on December 10th, 1999, the old Portuguese hotels will undoubtedly continue to enchant westerners and Chinese alike. The date incidentally does not mark any particular historical event. China simply wanted its colonial past put behind it some days before the dawning of the new millennium, the first time in five centuries when it can say that no foreign power controls any corner of the motherland.