The establishment of the communist People's Republic of China (PRC) in October 1949, which extended Cold War rivalries in Asia, hardened British intentions to retain the colony. Hong Kong's value to Britain's Asian policies was twofold. First, it was the starting point in an effort to contain communism and protect British interests, which ran from Hong Kong through Indochina, Thailand, Burma, Malaya, Singapore, India, and Sri Lanka. Second, the British hoped that retaining Hong Kong would perhaps facilitate Anglo-Chinese trade.
From a broader point of view, Britain entertained the idea that a prosperous and stable Hong Kong might dissuade the PRC from leaning toward the Soviet Union or promoting an Asian-style Titoism. To accomplish this, Britain took great efforts to develop Hong Kong.
The PRC also seemed to realize that a foreign-run Hong Kong would best serve their interests. Despite their one-nation cause, the Chinese communists had no plans to retake Hong Kong. Their policy was summarized as "long-term planning, full exploitation," meaning that there was no urgency to retake Hong Kong, whose colonial status should be utilized to maximize national interests. By 1997, when the British returned the colony to the PRC, Hong Kong had been transformed into an ultramodern city, an international financial center, and a vital seaport.
Hong Kong's value to the PRC was multifaceted. Economically, Hong Kong served as one of the few trading channels for the PRC to buy Western materials and earn coveted Western currencies. This thinking was soon justified when both the United States and the United Nations (UN) imposed sanctions on China during the Korean War and when the Soviet Union stopped assisting the PRC in the late 1950s. Diplomatically, Hong Kong helped the PRC gain diplomatic recognition from Britain, the first Western country to do so. From a strategic vantage point, by tolerating British control of Hong Kong the PRC hoped to drive a wedge in the Anglo-American alliance, which was at least partially achieved when Britain demonstrated reservations and sometimes opposition to U.S. efforts to place embargoes on Hong Kong and the PRC during the Taiwan Strait crises of the 1950s. As the only port along the Chinese coast remaining in foreign hands, Hong Kong also became a vital window and observation post for the PRC, allowing it to contact overseas Chinese, promote the PRC's cause, continue the civil war against the Republic of China (Taiwan), and counter American containment efforts.
The United States also found Hong Kong strategically useful. Given the absence of a diplomatic relationship with the PRC, Hong Kong served as the Americans' primary contact point with Mainland China, from which intelligence gathering could take place with relative ease. Moreover, Hong Kong's port facilities provided the U.S. Navy with a convenient fueling station during military expeditions, especially during the Vietnam War. In view of these advantages, America supported Britain's retention of Hong Kong and encouraged the British to improve the colony's economic and social conditions in hopes of making Hong Kong a free-world outpost that would stand in sharp contrast to conditions on the mainland.
Hong Kong's strategic importance began to recede in the early 1970s when the PRC and the United States normalized diplomatic relations. Hong Kong's diminished value was confirmed in 1984 when the PRC and Britain agreed on the return of the colony to Chinese control in 1997. Hong Kong's Cold War value was briefly revived after the PRC's Tiananmen Square crackdown on 4 June 1989, when Hong Kong's future sovereignty became contingent upon the PRC's international conduct and human rights record. In the end, it is hard to overstate Hong Kong's importance in the waging of the Cold War.
Law, Yuk-fun. "Delayed Accommodation: United States' Policies Towards Hong Kong, 1949–1960." Unpublished PhD diss., University of Hong Kong, 2002.; Tucker, Nancy Bernkopf. Taiwan, Hong Kong, and the United States, 1945–1992: Uncertain Friendships. New York: Twayne, 1994.