President Hu Jintao on Sunday led China in celebrating 10th anniversary of Hong Kong's peaceful return to Chinese sovereignty, promising Beijing's [Images] full support to the former British colony's continued economic growth, social stability and development of democracy.

"The central government will fully support Hong Kong in promoting economic development, improving well-being of the people and developing democracy," Hu said while addressing the inaugural ceremony of the third-term government of the Hong Kong Special Administrative Region.

Hong Kong's exchanges and cooperation, and particularly its business ties, with the mainland have grown increasingly closer.

With stronger support from the mainland, Hong Kong serves as an important window and bridge for China's economic, scientific, technological and cultural exchanges with the rest of the world, Hu said.

Hong Kong's success over the past 10 years shows that people are fully capable of managing Hong Kong well and sustaining its growth, Hu, also the general secretary of the ruling Communist Party of China said.

He noted that during the past decade, Hong Kong has maintained its capitalist system and way of life and fully exercised executive, legislative and independent judicial power, including the power of final adjudication as mandated by the Basic Law (Constitution).

The former British colony has steadily expanded its relations with other parts of the world. It has remained a free port and an international financial, trade and shipping centre.

It has been consistently rated as the most open and free economy and one of the most dynamic regions with the best business environment in the world.

"Hong Kong, an international metropolis, is thriving as never before," Hu said.

The principles of 'Hong Kong people administering Hong Kong' and a high degree of autonomy have been turned into a living reality, Hu said, adding late Chinese leader, Deng Xiaoping had creatively initiated the concept of 'one country, two systems'.

Deng personally oversaw China's negotiation with Britain on Hong Kong and the drafting of the Basic Law of the HKSAR, thus breaking a new ground in striving for China's peaceful reunification.

Hong Kong embraced Chinese sovereignty on July 1, 1997 as per the 'one country, two systems' formula under which Beijing promised not to change the existing capitalist social and economic systems in the territory.

"To ensure stability and development in Hong Kong, a society of diversity, it is important that its people set aside differences, be inclusive and work together to promote their common interests," Hu said on Saturday during a welcome dinner.

In his speech on Sunday, the Chinese President did not dwell on the sensitive issue and left it to the Chief Executive of HKSAR, Donald Tsang Yam-kuen, who pledged that his government will be committed to adhering to the principle of people-based governance.

"We will build a government that is more open. The public will not only be the focus of our policies, the public will be our partners in devising them," Tsang said at the swearing-in ceremony.

China on Saturday presented two more giant pandas to Hong Kong as goodwill gifts.

Hu also attended a flag-raising ceremony in Hong Kong during which the five-star national flag as well as that of Hong Kong were raised by ceremonial guards from the Chinese People's Liberation Army.