If you ship products to China by air, now is the time to shop around for bargain prices.

Rates have fallen sharply in recent months. Late last year, they dropped below the $2 per kilo mark between Chicago and Shanghai, and now one Asian carrier is offering rates between $1.20 and $1.40 from the West Coast.This may be an extreme measure prompted more by the turmoil in that carrier's home market than by market conditions, but there is little doubt that rates will continue to fall.

''We should see westbound rates come down further. I've heard some noises from carriers that they will be competitive if others lower their prices,'' said Jock Cocci, senior director of air freight products of Fritz Cos. in San Francisco.

In the opposite direction, rates have traditionally been much higher. John Gibson, manager in charge of international cargo at Canadian Airlines, said rates from Beijing have been extremely strong, rendering some of the airline's best yields out of Asia. There has been some movement on that front too, but nowhere near the dramatic rate erosion that's taking place in the westbound lane.

''Rates are not driven by the market. Competition goes by low rates, but carriers and vendors over there won't necessarily yield to market pressures. Agents try to push by quoting a lower rate and then try to leverage with the carriers, but it doesn't always work. There's some evidence that the hard line is beginning to erode, but they're still quite high,'' said Gene Boyer, chief executive officer of forwarder U-Freight America, adding that he expects some moderate price decreases.

The number of flights between the United States and China is on the rise. Of the North American carriers in the market, Northwest Airlines is increasing its Detroit-Beijing service from three flights a week now to five this spring. It stepped up Los Angeles-Shanghai flights from one to two a week this month.

Northwest Cargo President Bill Slattery has also expressed interest in freighter service to major gateways. In addition, he is interested to develop cooperation with Air China, which has an agreement to develop an alliance with the U.S. carrier.

An increase in passenger flights is also coming from Canadian Airlines. The carrier is to step up its Vancouver, British Columbia-to-Beijing flights from six per week to seven this summer and is planning three weekly flights to Shanghai. Further down the road, Canadian is looking at Guangzhou, Mr. Gibson said.

Of the three Chinese carriers currently serving the U.S. market - Air China, China Eastern and China Southern - Air China has the most ambitious expansion plans for this year. The airline, which now has Boeing 747 freighter flights to New York and passenger service to various U.S. points, is in the process of converting a 747 into a freighter, which is earmarked for Los Angeles.

It is also to take delivery of three 747-400 combi aircraft this year, with which it will use to augment its San Francisco flights and launch a Los Angeles service.

Air China is the dominant player at its Beijing home base, while China Eastern is the leading carrier at Shanghai, where its headquarters are located. China Southern is a relative lightweight when it comes to cargo, operating Boeing 777 passenger flights between Los Angeles and Guangzhou in southern China.

According to John Chang, cargo sales and services manager of Air China in San Francisco, the combined capacity of the U.S. and Chinese carriers alone is in excess of export demand in the United States. But there are also airlines from other Asian countries, who are looking increasingly to China as currency depreciation in their home countries threatens to stifle imports from North America.

Several of them are in the process of increasing their presence in China. Singapore Airlines launched two weekly freighter flights to Shanghai in late November, and Nippon Cargo Airlines is planning to introduce Tokyo-Shanghai service some time this year, confirmed Pete Diefenbach, assistant director of sales and marketing for Nippon Cargo in New York. ''The situation in Asia is hurting our westbound volumes. China is a point that has a bit of demand. We'll probably go in once a week,'' he said.

This month, reports surfaced in Hong Kong that Air France will begin a direct Paris-Shanghai air service in April and will increase its Paris-Beijing service as well.

Under terms of a pact signed in Beijing Jan. 15 with China Eastern, the two airlines will each fly three direct round-trips a week between the two cities, sources report. Air France will also increase its weekly flights to Beijing from four to five. Meanwhile, the biggest expansion plan is being hatched in Korea. Korean Air, one of the top five cargo carriers worldwide, is looking to throw a lot of freighter capacity at the Chinese market. So far, it flies passenger planes to nine Chinese cities, in addition to one freighter service to Shenzhen. The expansion plan calls for freighter flights to Shanghai, Beijing and a couple of other points in China, said Bernard Akle, cargo services manager for the Americas.

In the main, China's air cargo flows through the gateways of Beijing, Shanghai and Hong Kong, with modest amounts passing through the southern airports of Guangzhou and Shenzhen. In the long run, more points will open up. The Civil Aviation Authority of China is preparing to open 12 more cities to foreign carriers. But it will take a while before they can handle large amounts of cargo. That applies even to existing gateways.

''In Shenzhen, still a fair amount of work has to be done to develop the infrastructure to handle freighters. On the other hand, Hong Kong is costly. That may attract some carriers,'' Mr. Gibson said.

Actually, a considerable amount of air freight leaves China by ship at the moment. From ports in the north it travels to Korea, whence it is flown to North America and Europe. This strategy stretches transit time, but is cheaper than flying the freight all the way from China. The sea-air concept is mainly an eastbound phenomenon, although some traffic also pours into China by that lane.

While rates are advantageous and capacity more than adequate, the same cannot be said of service levels, however. That begins with customs. Agents report that it often takes two days to clear shipments, and sometimes freight may sit in the warehouse for a whole week. ''It's getting better, but it's not the level we are used to in the United States,'' said Mr. Cocci of Fritz Cos.

The service levels shown by forwarders in China also leave much to be desired, Mr. Boyer said. To a large extent, this is because of the large Chinese agents who control traffic at that end. ''Most Western agents deal with the big boys, like Sinotrans, and they're just another number for them. We didn't want to get involved with a big one like Sinotrans. They think too much like a Chinese communist setup. Efficiency is not part of their lexicon,'' Mr. Boyer said.

The airport facilities in China can present another hurdle. This is in part due to the monopolistic handling situation at the Chinese airports, but there are also basic flaws.

''Often, it's simple fundamentals. For instance, our warehouse in Shanghai is the only one that's dock-high; all others are on ground floor level. The area is flat plane, and when floods come - whenever it rains heavily - your freight gets wet,'' Mr. Boyer said.

Paul Graham, head of the Asia-Pacific operations of forwarder Circle International, sees light on the horizon, pointing to sizable investments in sea and airports. ''Over the next five years, most major gateways will be reasonably well-equipped, and in 10 years some of the smaller ones will be OK as well,'' he predicted.

It gets more difficult if your freight is headed for the interior of China. Beyond the gateways, most freight travels by truck, as the domestic carriers haven't got the capacity to move cargo,'' Mr. Cocci said. On major arteries, like the road between Beijing and Nanjing, that's not too bad, but remote areas pose problems. ''The right equipment is sometimes difficult to get hold of. Project work is still a logistics challenge,'' Mr. Graham said.

''The whole ground infrastructure is archaic. It needs substantial improvements,'' is the verdict of Canadian Airlines' Mr. Gibson.

''Actually, the total infrastructure for doing business is still inadequate. To make the process more fluid everything - from road to air - needs major improvement. The Chinese are taking some steps, but I don't know if it is fast enough to keep up with the pace of the market,'' he concluded.