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HONG KONG (Reuters) - Chinese President Hu Jintao on Sunday swore in Hong Kong's new leader while calling on him to resolve "deep disagreements" ranging from recent government scandals and political discord in the free-wheeling financial centre after a year of transition.
Security was tight at the same harbor-front venue where the British handed Hong Kong back to Communist Party-run China exactly 15 years ago, with hundreds of police forming a solid ring fence to ensure the isolated demonstrations were kept out of sight and earshot.
Hu expressed China's confidence in Hong Kong's role as a free, law-abiding society, though in a sign of Beijing's anxiety over recent tensions, he appealed for unity and called on the administration of Leung Chun-ying, who was sworn in for a five-year term, to heed the recent social schisms.
"While we recognize Hong Kong's achievements 15 years after the handover, we must also be conscious of the deep disagreements and problems in Hong Kong society," Hu said.
A lone protester stood and heckled Hu as he spoke, demanding an end to one-party rule and dictatorship in China, before being wrestled away by nearly ten security personnel.
Outside the venue, masses of Hong Kong police and high barricades smothered all attempts by protesters to approach. Several demonstrators were taken away in a police van while a truck draped with black June 4 slogans denouncing Beijing's bloody crackdown on protesters in 1989 was forced away and tailed by a police motorcycle.
"Hong Kong has freedoms, and we have the right to protest! Why do you even stop us from walking?" lawmaker Lee Cheuk-yan shouted into a loud hailer as he harangued police blocking him and other activists.
Hong Kong is a liberal, global financial hub agitating for full democracy, making it both an asset and a potentially dangerous precedent for China where people are becoming increasingly intolerant of rights abuses and curtailed freedoms.
More than 100,000 Hong Kong citizens later hit the streets in an annual mass July 1 protest, sending a defiant message to China's leader that the city cherishes its freedoms in the face of perceived Beijing meddling in its domestic affairs, and calling for unfettered democracy in 2017.
"Hong Kong's human rights record has backtracked," said one of the demonstrators, Theresa Cheng, a 20 year-old university student. "Freedom of speech is shrinking and reporters are facing more obstacles."
Other issues stoking citizen anger include an illegal construction scandal that has badly hit Leung's integrity and popularity, a yawning wealth gap, corruption and pollution - though Sunday's events were held under a sunny blue sky.
Praised as one of the world's freest and simplest low-tax havens for conducting business and a gateway to China, Hong Kong has nevertheless struggled over the past 15 years, with critics accusing Beijing of extensive behind-the-scenes meddling in political, electoral, academic, media and legal spheres.
This year saw a fraught, mud-slinging electoral race for the city's top job that was eventually won by Leung, who now faces a damaging scandal over illegal constructions in a luxury villa that has corroded public trust, an infraction that had earlier torpedoed the chances of his election rival, tycoon Henry Tang.
Hong Kong's wealth gap has also widened to its worst level since the handover - while air pollution, high property prices, and anti-corruption probes into former and current senior officials' links to tycoons have stoked public frustration and tarnished the city's reputation for clean governance.
"Clearly there has developed an over-cozy, even incestuous relationship between top officials and big business," said Regina Ip, a lawmaker and former senior government official.
China again proffered a raft of economic goodies on Hong Kong to coincide with Hu's visit - it said it would experiment with service-sector reforms in a new business zone next door in Shenzhen's Qianhai as a "mini Hong Kong" to consolidate Hong Kong's economic prospects.
But public "negative" feelings towards the Chinese government are at a record high, according to a recent University of Hong Kong poll.
The gulf in freedoms between Hong Kong and China remains stark since the territory returned to Chinese rule, with some residents taken aback by images of Hu attending a military parade at a Hong Kong People's Liberation Army barracks on Friday as thousands of soldiers, assembled before tanks and defense hardware, hailed their leader.
During a visit to a cruise terminal construction site built on Hong Kong's old Kai Tak airport runway, Hu, in a hard-hat, was asked by a reporter to explain the June 4 killings.
"I hoped to ask him questions that Hong Kong people really want to ask," said Rex Hon, the reporter, who was interrogated by Hong Kong police officers for 15 minutes after his unscripted outburst. Hu ignored the question.
Mainland authorities also censored parts of CNN's broadcasts in China on the protests during Hu's visit that demanded a probe into the suspicious death in custody of dissident Li Wangyang, whose relatives accused officials in Hunan of murder.
Leung, 57, a Beijing-backed surveyor and son of a policeman, succeeds the bow-tie wearing Donald Tsang as chief executive but his popularity has been damaged by the housing scandal and the strength of his ties to Beijing.
Unlike Hong Kong's first post-1997 leader, Tung Chee-hwa, a shipping tycoon, and Tsang, a lifelong civil servant, Leung is a self-made millionaire who has championed grassroots causes such as poverty alleviation and building more public housing.
Leung, dressed in dark suit and red tie, said the turbulent road to his political ascendancy had been "humbling" and he welcomed scrutiny by the media and public during his term.
"I believe that we can resolve the conflicts that exist in our society and the clashes that may arise from different values or political ideologies," he said his inauguration speech. "With our concerted efforts, Hong Kong, this Pearl of the Orient, will shine even more brightly."
Additional reporting by Venus Wu, Lee Chyen Yee, Sisi Tang, Bobby Yip and Clarie Lee; Editing by Nick Macfie and Daniel Magnowski