Hong Kong's economic success does not rest only on the hard-working ci
tizens and smart entrepreneurs. Its prosperity reveals the fundamental
, rational-strategic relations between China and Britain. Different fr
om other analyses on Hong Kong's political economy, this article takes
a rational strategic approach to examine the unique characteristic of
Hong Kong as a strategic arena (in 1949-68) with different meanings f
or different agents. The main theme is to contextualise the economic p
ath and domestic economic policy orientation of the small colony by si
tuating it internationally, and relating it with the rational consider
ations of governments of China and Britain. The two governments exerte
d rational-strategic influences on Hong Kong after careful assessment
of the particular situation and feasible alternative. Each of them too
k Hong Kong as a strategic arena with the expectation to optimize one'
s own payoff.