THE announcement that the vice-chancellor of Hong Kong University will retire before his contract expires roused the university's student union out of a dormant year and into action yesterday, and the next year will reveal whether the university itself isas concerned about the 1997 transition. About 40 students petitioned the University Council to let the union's Provisional Executive Committee represent them on the committee which will select a new vice-chancellor, to replace Professor Wang Gangwu when he retires in mid-1995 instead of 1996. The students had been unable to inspire enough interest to form a union executive last year, but their unsuccessful bid to take part in the selection committee was roused by recognition of the importance of the vice-chancellor's position. They know that the new vice-chancellor will have to oversee not only the university's policies and practice, but to steer it through the transitional period ahead. The next six to nine months spent selecting a replacement will reveal whether the university is roused to the same recognition, and selects a new vice-chancellor as part of a plan to tackle the 1997 transition. A leading administrator at the university doubted any radical changes would follow. ''There is unlikely to be any great change from the last time in 1984. We don't believe in pulling a blanket over our heads, but our student number targets are based on the University and Polytechnic Grants Committee grant period from 1995 to 1998. The 1997 question is not a big consideration,'' he said. For his part, the Professor insists through the university information machine that his plan to retire early is simply to coincide with his 65th birthday - even though his birthday is not until October and he plans to retire mid-year. One sceptic at the university also pointed out that: ''You have to remember that the job of a university vice-chancellor is one of the highest paid and most powerful you can get. You would not give it up for less than a good reason and certainly not justa year early.'' Academics have questioned why the vice-chancellor's announcement was made before last night's university council meeting where it could have been discussed, and have questioned whether political pressure has been exerted. University heads are traditionally represented on the Executive Council, and Professor Wang was groomed by his predecessor Dr Rayson Huang to take his place. But despite a Queen's honour - a CBE - in 1991 and his work as chairman of the Environmental Pollution Advisory Committee, Professor Wang's brief service on Exco from January 1990 to October 1992 did little to increase outside support for the university and failed to inspire support from some of his own staff. His rejection of an offer to become an adviser to China earlier this year also did not bode well for China's attitude to the university. The university's exchange programmes with the mainland have also lagged behind those of other universities, sparking concern that China may take this as evidence of insufficient homage. The University's Mission, adopted in October this year, also stresses the international outlook and approach of the university. Sceptics also believe some assurances are necessary that political pressure has not been brought to bear to force the vice-chancellor's move, but these are unlikely to come from Professor Wang who tends mostly to elude journalists or adroitly sidestep their questions. He plans instead to retire further from the Hong Kong limelight by returning to Australia, where he was Professor of Far Eastern History at the Australian National University in Canberra from 1968 to 1986. The move is unlikely to be a big upheaval for someone who has spent much of his life studying and writing about the themes of rejection, acceptance and reconciliation with Chinese civilisation, and studying and working around the world. He attended school in Malaysia and university in Nanking, Singapore and London, then has also lectured in Malaysia, London, Hawaii and Kansas. And observations about the 1989 student protest contained in his collection of essays The Chineseness of China might lend insights into his announcement. In that work, he said he was not surprised the Chinese people submitted after the Tiananmen movement was crushed. ''A billion people cannot be oppressed into submission or dominated,'' he noted, preferring to believe that they took the traditionally practical option when faced with the choice between authoritarian rule or anarchy - the yin versus the yang. A few kindly supporters have speculated that the vice-chancellor's decision to step down early and return to Australia might reflect this desire for harmony - perhaps even a move to help the university tackle the approach of Chinese sovereignty in 1997. But academics have wondered just how easily the university will attract a vice-chancellor of the right calibre and experience. ''However much the university might want to distance itself from 1997, it has the reputation of a British model producing British supporters. Anyone overseas contemplating the job will be only too aware of 1997 and how the university is viewed,'' one said.