Protest organisers in Hong Kong say they are expecting upwards of 100,000 people to join a march through the Chinese territory in a demonstration to demand greater democracy.

The march which began on Wednesday afternoon has become an annual event in Hong Kong as the former British colony marks the 12th anniversary of the territory's handover to Chinese rule.

A formal parade earlier in the day involving dragon dancers, soldiers and children in colourful costume was staged to mark the anniversary of the handover.

But the protest march expected later has become a focus for opposition to the government and calls for democratic reform.

Since its return to Chinese rule on July 1, 1997 Hong Kong has largely retained its Western-style civil liberties, including press freedom and the right to hold public protests.

But its people still cannot directly elect the city's chief executive or all legislative members.

Turnout for last year's protest was relatively low because of a strong economy and a period of national pride in the run-up to the Beijing Olympics.

But organisers say that with Hong Kong's economy now in a slump and unemployment on the rise, many more people are expected to join the demonstration.

As part of this year's march, hundreds of civil servants and government contract workers are set to protest as organised groups for the first time.

They are demanding better work conditions and pay - signs of public frustration that experts say could alarm Beijing.