AS A city, Hong Kong is defined by its history in a way few other places are. It is an invention, a historical accident, a 155-year-long aberration. With 1997 drawing closer, the curious circumstances of the Fragrant Harbour take on more resonance, and themanner in which the territory's beginning contained its ending, is fascinating. European trade with China had been going on since the early 1500s, but only mushroomed in the 18th century as the demand for tea and silk grew. This led to a trade imbalance, which the Europeans resolved by introducing opium, grown in Bengal under the control of the British East India Company, to the Chinese. In 1839, a new commissioner was appointed in Canton (now Guangzhou), with the task of suppressing the trade in opium by seizing all stocks of the drug in the hands of the foreign traders. Captain Charles Elliot, the British trade superintendent, was forced to hand over 20,000 chests of opium. The British traders withdrew from Canton, first to Macau and from there to Hong Kong Island. Lord Palmerston, the British foreign secretary, demanded compensation for the seized opium, freedom for British traders in China and a port from which to conduct trade. An expeditionary force was sent to blockade Canton, and the Chinese decided to negotiate. An agreement was never reached, but Elliot decided to occupy Hong Kong anyway. Fighting continued, Shanghai was attacked and Nanking besieged. The Chinese gave in. They paid Britain 21 million silver dollars, agreed to diplomatic negotiations, opened five ports to British merchants, and ceded Hong Kong to Britain in perpetuity. In 1861, as a result of another small war, China was forced to sign the Convention of Peking (now Beijing), which granted Britain sovereignty over the Kowloon peninsula and Stonecutters Island. Then, on the July 1, 1898, Britain leased the New Territories, for a period of 99 years. This, of course, is not the whole story, but any history of Hong Kong must be, perforce, a history of the British colonisation of the islands and peninsula. Frank Welsh's new book, A History of Hong Kong, is just that, a study of British political exigencies, power-plays and intrigues, and what effect they had on the colony (he points out that it is a colony, not strictly a territory as the British Government likes to call it ''. . . more due to a desire to shuffle off responsibility than to semantic accuracy''). Although much of the ground has been throughly covered before, Welsh provides a detailed and well-researched analysis of the political vicissitudes which shaped Hong Kong. He is particularly interested in three questions which he feels have never been adequately explained, and although somewhat esoteric for a reader with only a casual interest in Hong Kong's history, it nonetheless provides an interesting view of British diplomatic machinations in the 19th century. Welsh's first question concerns Lord Napier's trade mission to China in 1834 which, by its failure to reach a reasonable commercial agreement, led directly to the first Anglo-Chinese war. Napier was by all accounts an arrogant buffoon: why then was he selected for such a sensitive mission? Welsh argues, plausibly, that Lord Grey, the prime minister at the time, owed much to Napier for his support during the passage of the 1832 Reform Bill, and that Napier requested just such a mission. The next major question Welsh turns his attention to is why Sir John Bowring, Governor from 1854 to 1859, came to be appointed. Bowring, the man mainly responsible for the second Anglo-Chinese war, was a thorough European, fluent in many European languages, with no colonial experience and no knowledge of the East - and would appear to be a curious choice. Despite being an economist, Bowring handled his personal affairs badly, and in 1847 was forced to seek paid employment. Described as a man possessing every gift except common sense, with a great capacity for pushiness and self-dramatisation, he nonetheless had many powerful and influential friends in the Whig party, and they were able to secure for him the post of Consul. As history records, he was an inflammatory plenipotentiary, and his appointment, made on the basis of party loyalties, had far-reaching ramifications. Welsh's final important question, whose consequences are still with us today, is why the British only required a 99-year lease on the New Territories, rather than complete ownership. It seems Britain had no wish to offend China, seeing it as vital to preserve Chinese territorial independence, for the sake of preserving commerce. Although Britain could have taken as much land as it wished, it followed precedents set by other European powers, and negotiated a lease. There was a feeling in Britain that if a lease could be negotiated to begin with, as an outline agreement, the area could in the future be consolidated into British territory proper. The details could be worked out at a later date. However, as Welsh points out: ''. . . the devil is in the details.'' Welsh's interest in Hong Kong started when a London bank, of which he was a director, bought a large Hong Kong bank. His background in trade and finance is clearly visible in the book, which is strong on the merchant dynasties, the hongs and the taipans. He is an able historian, with a good eye for detail, able to wade through the verbiage of Victorian politicians and produce a clear and even-handed account of the development of the colony. A History of Hong Kong, by Frank Welsh, (HarperCollins, $295).