Although Hong Kong is one of Asia's most prosperous and well-educated societies, the city's leader is not currently directly elected by the people.

Hu Jintao, China's leader, arrived in Hong Kong on Saturday to take part the anniversary celebrations, inspecting troops and attending a celebratory Grand Variety Show.

Pro-democracy

The British in Hong Kong
1841 - Hong Kong island settled by British.

1860 - China cedes Kowloon peninsula to Britain for all time.

July 1, 1898 - Britain begins 99-year lease on New Territories and 235 adjacent islands.

December 8, 1941 to August 14, 1945 - Japanese troops occupy Hong Kong.

December 19, 1984 - Margaret Thatcher, then British prime minister, and Zhao Ziyang, then China's premiere, sign accord to return Hong Kong to Chinese sovereignty on July 1, 1997.

September 18, 1995 - Pro-democracy candidates win sweeping victory in Hong Kong's last legislative election under British rule. China vows to disband legislature.

July 1, 1997 - Britain returns Hong Kong to Chinese sovereignty.
About 100 pro-democracy demonstrators, some chanting "Power to the people!", marched on a hotel where Hu was attending a banquet, but were stopped a few blocks away by a wall of police.

Hu planned to leave Hong Kong on Sunday before pro-democracy groups hold an annual street protest later in the day.

Hong Kong's economy has become tightly linked to mainland China, with Hong Kong companies investing heavily in southern China's Pearl River Delta region, employing more than 10 million factory workers.

Meanwhile, tourists from the mainland have helped pull Hong Kong's economy out of the recession caused by the outbreak of SARS, or severe acute respiratory syndrome in 2003.

But mainland China is also one of Hong Kong's greatest competitors.

Hu attended the anniversary celebrations,
including a Grand Variety Show [AFP]
Shanghai's stock market is competing with Hong Kong for Chinese companies seeking new listings, and Shanghai's port surpassed Hong Kong's this year as the world's second busiest behind Singapore.

Another port in Shenzhen is expected to overtake Hong Kong next year. Since Hong Kong returned to China in 1997, the city has been governed under a "one country, two systems" policy.

The arrangement was put in place to allow the territory to keep its capitalist economy and British-style legal system when it returned to China.

For the most part, Beijing has honored its promise to let Hong Kong enjoy a degree of autonomy, but critics accuse Chinese officials of behind-the-scenes meddling.