By James Pomfret
HONG KONG (Reuters) - Chinese President Hu Jintao oversees the swearing-in of Hong Kong's embattled leader on Sunday, stepping beyond his comfort zone of staid one-party rule in Beijing into a former British colony used to scandal and raucous protest.
Hong Kong is a liberal, global financial centre agitating for full democracy in 2017, making it both an asset and a potentially dangerous precedent for China where people are becoming increasingly intolerant of rights abuses and curtailed freedoms.
China had been hoping for a smooth transition of power from outgoing Hong Kong Chief Executive Donald Tsang to his Beijing-backed successor, Leung Chun-ying, but a series of scandals that has infuriated the public, and undermined the government's reputation as clean and honest, makes that unlikely.
"He (Leung) will have a very difficult, if not turbulent, one or two years," said political analyst Willy Lam. "The honeymoon has gone before he's even started."
China later this year undergoes its own leadership transition which has been rocked by political intrigue that toppled Chongqing party chief Bo Xilai. It doesn't want further distractions. Earlier this year, it urged Hong Kong to "work with one heart" to address its political controversies.
The bow-tie wearing Tsang, who has led Hong Kong since 2005, came under fire for private yacht and plane trips with tycoons, renting a luxury apartment at a below-market rate and lavish spending on overseas work visits for which he apologized.
The favorite to take his place, Henry Tang, was hit by a series of successive scandals over extra-marital affairs and an illegally built basement and wine cellar in a mansion, that eventually led Beijing to pull its initial support for him.
Now Leung is facing criticism over a minor, but sloppily handled housing scandal of his own, prolonging a headache for China's Communist Party, which has tried to maintain a firm grip over the territory since 1997.
PEAK, POLITICS AND POLLUTION
The discovery of six illegal structures in Leung's HK$500 million ($64.44 million) villa cloistered in the misty heights of Victoria Peak carries poignant echoes of the Henry Tang scandal.
Leung's unconvincing and inconsistent explanations have triggered public outrage, with calls for his resignation growing even before he takes office on Sunday.
"The public can't accept a chief executive who lies," said Lee Wing-tat, chairman of the opposition Democratic Party.
Leung has also been widely accused of being an underground Communist Party member, a charge he denies.
The gulf in freedoms between Hong Kong and China remains stark 15 years since the free-wheeling capitalist centre returned to Chinese rule on July 1, 1997, with guarantees from Britain and China of wide-ranging autonomy.
Many observers, familiar with Hong Kong under the British, say little has changed under Chinese rule, apart from the sometimes choking pollution cloaking panoramic views of the Peak from "Kowloon-side" across the harbor. The police and civil service are viewed as generally honest and efficient, while it remains one of the world's freest, low-tax havens for business.
But critics have accused Beijing of extensive behind-the-scenes meddling in academic, political, electoral, media and legal spheres, through the so-called "united front strategy" of co-opting the city's elite to its side.
Hu arrives in Hong Kong on Friday and leaves after the ceremony on Sunday. A massive protest is expected later in the day calling for full democracy, human rights and freedoms in Hong Kong and mainland China.
An estimated 25,000 people took to the streets of Hong Kong over the suspected murder of a Chinese dissident by Chinese officers in June, while close to 200,000 people showed up on June 4 for a candlelight vigil to commemorate those killed by soldiers in and around Beijing's Tiananmen Square in 1989.
China's leaders have sought to pacify Hong Kong's sometimes restive citizens with economic sweeteners and Hu will hand out gifts during his visit including new offshore yuan currency initiatives and plans to integrate the reach of Hong Kong's financial and offshore yuan services into Qianhai, a new development zone in southern China.
"Most of the people in Hong Kong are economic animals rather than political animals," said Lam. "So they (Beijing) will literally use preferential policies to buy the support of the Hong Kong people."
Analysts expect pro-Beijing forces in Hong Kong to corral broader support for Leung behind the scenes given shaky backing from the city's tycoons and civil service, while expected social welfare spending increases might soften public attitudes.
But the fundamental issue that Leung and Beijing will have to tackle is moving the city towards full democracy, as promised by Beijing after intense pressure from activists.
Since Hong Kong reverted to China, a succession of leaders has been hit by governance crises that analysts say reflected a lack of a popular mandate for top officials to go about their tasks.
"You have this lopsided constitutional framework ... that is unworkable and unsustainable," said Anson Chan, a respected former chief secretary often called Hong Kong's "conscience".
China has promised the direct election of Hong Kong's leader in 2017, but many analysts are skeptical. They also expect Beijing to introduce a nomination threshold to prevent opposition candidates getting on the ballot sheet in the first place.
(Reporting by James Pomfret; Editing by Nick Macfie)