THE SPECTACLE of Britain and the People's Republic of China negotiating the fate of Hong Kong is intriguing on at least two counts. First, there is the irony of a Tory British government presiding with a stiff upper lip over the loss of this relic of empire. Meanwhile, a revolutionary Chinese government agrees to wait patiently for recovery of the territory until the colonial lease is up in 1997, and to leave its internal life unimpaired for 50 years after that.

Then there is the revealing ambivalence of the 5.5 million people of Hong Kong. Far from demanding immediate liberation from the imperial yoke and instant reunification with their mainland kin, they seem to prefer a very deliberate transition from their existing affluence, free-enterprise system and open society to theuncertainties that the future holds.

China gave Prime Minister Margaret Thatcher, who signed the terms of reversion in Peking on Wednesday, a choice between seeing the colony revert with an agreement or without an agreement. She opted, as she had to, for an agreement, and worked hard on the details. The attitude of Deng Xiaoping, architect of the agreement, was what really counted.

China could have taken over Hong Kong in an afternoon: it is Chinese territory inhabited by Chinese people, and no British force could have prevailed. Mr. Deng, however, plainly saw the value of arranging an orderly reversion. One reason was to ensure that Hong Kong would remain a funnel of capital and technology to the mainland. A second reason was to demonstrate to a wary Taiwan the safety and the rewards of coming back under Peking's aegis by a process of mutual consent.

Will it all work out? Mrs. Thatcher has a political interest in telling one and all that by her civilized exercise in slow-motion decolonization she has done everything that could be asked of her to guarantee the future stability and prosperity of Hong Kong, even after China reclaims it as a "special administrative region" in 1997. She can point to the self-interest of Peking in upholding the agreement, and to the relief that many Hong Kong residents have shown toward the terms of reversion.

The people of Hong Kong were consulted in the making of this agreement, but only consulted. There was never any possibility or pretense that they could claim a right of self-determination. There could not have been unless -- impossible thought -- Britain were prepared as one option to create and sustain a second Taiwan. The British are playing a conscientious end game, within the limits of their power. The present and the future of Hong Kong belong to China.