(Adds comment from China's Foreign Ministry)
By Anne Marie Roantree and Clare Baldwin
HONG KONG, Sept 3 (Reuters) - Hong Kong's first Chinese leader after the end of British rule appealed to all sides in the democracy dispute to work together on Wednesday as the last colonial governor said China must stand by its promises.
Hong Kong, which returned to China in 1997, is bracing for a wave of protests after Beijing on Sunday ruled out fully democratic elections for the city's leader in 2017, sparking a political showdown with democrats.
"Hong Kong is our home, we have to work together," first Chief Executive Tung Chee-hwa, 77, handpicked by China, said in a speech.
"The only way out, and the only way forward, is through working together, hand in hand, otherwise there will be no end to bitter squabbles and the paralysis."
A half-million strong anti-government rally forced former shipping magnate Tung to step down in 2005, nearly two years before completing his second five-year term. He had faced criticism over plans for an anti-subversion bill amid widespread calls for greater democracy.
Police on Monday used pepper spray to disperse activists who heckled and jeered a senior Chinese official who flew to Hong Kong to explain the decision by China's National People's Congress Standing Committee announced on Sunday.
China said in the Basic Law mini-constitution for Hong Kong that universal suffrage was an eventual aim. On Sunday, it said it would permit a vote for Hong Kong's next chief executive, but only for a handful of pre-screened candidates.
Chris Patten, the last British governor of Hong Kong who was in tears during the 1997 handover ceremony, said Britain had a moral and political obligation to ensure China respects its commitments.
"We have a huge stake in the wellbeing of Hong Kong, with a political system in balance with its economic freedom," said Patten in a letter to the Financial Times.
His letter came a day after Britain's parliament said it had rejected Chinese calls to scrap an inquiry into Hong Kong's progress towards democracy.
China's Ministry of Foreign Affairs on Wednesday criticised the British inquiry, saying it represented interference in China's internal politics.
"Today's Hong Kong is not the Hong Kong of 1997," the Chinese ministry spokesman, Qin Gang, said at a daily press briefing. "The affairs of Hong Kong Special Administrative Region are China's domestic affairs, and we oppose outside interference in those affairs in any form."
Communist Party leaders in Beijing fear calls for democracy spreading to other cities. Britain itself made no mention of democracy for Hong Kong until the dying days of more than 150 years of colonial rule.
Pro-democracy activist group Occupy Central has threatened to lock down Hong Kong's financial district on an unspecified date unless China grants full democracy.
"Our target is a 2017 chief executive election that meets international standards. Although this target has been brutally strangled ... the significance of our movement will not end at this point," the group said in a statement emailed to reporters on Tuesday.
"We Hongkongers won't accept failure in our road to democracy."
Hedge fund manager Edwin Chin, one of the financial sector's prominent supporters of Occupy, urged Hong Kong people to continue to rally for democracy.
"If people do not fight, it will get worse. Democracy in Hong Kong is difficult, but I do not lose hope. I hope the next generation can (make it come true)," he said.
Chin told Reuters on Tuesday that a leading business newspaper had dropped his long-running column, branding it a "political decision".