It began with 200 tons of watermelons the Chinese feared would rot. They ran a white flag up a watchtower and invited Soviet soldiers on the other bank of the blue-gray Amur River to a meeting.

The KGB border guards went, then reported back to officials in this Siberian city 3,500 miles east of Moscow that the Chinese wanted to deal.After some discussion, Blagoveshchensk authorities dispatched a barge to pick up the melons, giving the Chinese a load of fertilizer in exchange.

That modest barter arrangement in 1987 began trade between the Soviet Union's Amur region and the neighboring Chinese province of Heilongjiang that grew to the equivalent of $81 million last year.

Russians in Blagoveshchensk, a boom town of the 19th century gold rush, once worried about the Chinese coming. Now they want them to.

In the 1960s, when ideological and border disputes poisoned Soviet-Chinese relations, huge portraits of Mao Tse-tung sprouted on the shore in Heihe, the city half a mile away across the Amur.

Chinese tanks and military vehicles maneuvered on the ice-bound river and Mao's frontier troops even bared their buttocks to mock Soviet soldiers, recalled Capt. Alexander M. Kirushin, commander of the 50 border guards in Blagoveshchensk.

"We were frightened and ready to evacuate," said Irina Alexandreyeva, 62, then a nurse in this city of 210,000. "We were prepared for anything. The Chinese could have crossed."

Now, government and business leaders in Blagoveshchensk court workers, investors and potential trading partners on the other side of the Amur in an effort to end chronic shortages of goods and spur the local economy.

Vladimir Vechinkin said: "In our region, there's no way to avoid external economic relations. We border on our great neighbor, the People's Republic of China."

He is first deputy chairman of government in the Amur Region, an area the size of Montana where slightly more than 1 million people live.

As the May 15 summit approaches, Soviet officials describe Blagoveshchensk as a showcase for the advantages of better relations.

It is an atypical example.

Border trade totaled $146 million last year, according to the Soviet Foreign Trade Ministry. That means trade in this area accounted for more than half the commerce along the 5,000-mile frontier.

Changes wrought by it are graphic in Blagoveshchensk, where the Chinese have arrived and more are on the way.

On the fifth floor of what someday will be the Tourist Hotel, Chinese workers slather mortar onto tiles. It's part of a $12 million contract for painting, tiling and performing other work on three building sites awarded last year to a Heihe construction firm.

When the Tourist Hotel opens, Blagoveshchensk will have its first Chinese restaurant.

"We need to increase construction threefold by the year 2000 and build 64 new enterprises, but we have a shortage of building trade specialists," said Anatoly S. Lagutin, chief of the regional construction organization Amurstroi. "The Chinese have the specialists and a talent for manual work."

They also come cheap: Each of the 100 Chinese working in Blagoveshchensk earns the equivalent of $4.50 a day, about one-fourth the average Soviet industrial wage. They also get free housing in an Amurstroi dormitory and are fed by a Chinese chef at Soviet expense.

Classrooms at Middle School No. 14 are filled with the voices of Russian children singing songs or reciting verse in Mandarin.

It is a modest demonstration of interest in Chinese culture when compared with instruction in other foreign languages - English is taught in hundreds of Blagoveshchensk schools - but Principal Albina N. Dimnich expects to hire two more Chinese teachers this year.

"All parents of my pupils tell their kids: Study hard, and maybe in the future you'll become a specialist in Chinese."