Hu Jintao, the Chinese president, has arrived in Hong Kong ahead of ceremonies marking the 10th anniversary of the return to Chinese rule.
The visit is his first since he became the China's leader.
Tight security has been put in place for his stay, with the Chinese leader expected to face protests from pro-democracy activists and the Falun Gong spiritual group.
His itinerary includes banquets, a visit to a new panda exhibit, a variety show and Sunday's handover ceremony.
Speaking to reporters after his arrival he praised the way the city had weathered an often troubled decade to celebrate the anniversary with its economy in strong form.
"I feel sincerely happy about the achievements of Hong Kong in the 10 years since returning to the motherland, and even more full of confidence in Hong Kong's future," Hu said.
"I feel sincerely happy about the achievements of Hong Kong in the 10 years since returning to the motherland, and even more full of confidence in Hong Kong's future"
Hong Kong's economy was hammered by the Asian financial crisis that erupted a day after the handover on July 1, 1997.
It was pummelled again in 2003 when the outbreak of severe acute respiratory syndrome, or SARS, killed nearly 300 people and virtually shut down the city's vital tourist industry.
The past decade has seen the Hong Kong economy become increasingly reliant on the mainland.
On Friday the two sides agreed to deepen a 2004 trade pact, known as the Closer Economic Partnership Agreement (CEPA) that has slashed tariffs and given Hong Kong companies freer access to mainland markets.
But critics note that problems like air pollution and the rich-poor gap have worsened.
Other are angry at what they say is Beijing's heavy-handed management of political change in the territory, despite popular support for democracy.
Hu is likely to be followed during his visit by protests of pro-democracy activists and members of the Falun Gong spiritual movement, which is banned on the mainland and branded an "evil cult" but remains legal in Hong Kong.
Falun Gong says the Hong Kong government has blocked more than 140 Taiwanese practitioners from entering the city in the days ahead of the handover anniversary.
Hong Kong's immigration department has declined to comment specifically, but says it reserves the right to decide who can enter the city.
Pro-democracy legislators and other activists plan a protest march on Sunday with one organiser say they expected up to 60,000 people could turn out.