By Tan Ee Lyn and James Pomfret
HONG KONG (Reuters) - Tens of thousands of pro-democracy protesters took to the streets of Hong Kong hours after Chinese President Hu Jintao swore in the city's new leader and urged him to resolve what he called "deep disagreements" among the islanders.
The by-now annual July 1 demonstration - marking the end of British colonial rule in 1997 - was the biggest in years as people took advantage of Hong Kong's laws that make it the only place in China where public protests are permitted.
Hundreds of police maintained a tight cordon around the same harbor front where Britain handed Hong Kong back to Chinese rule 15 years ago as Hu swore in the new leader - something that also always happens on July 1.
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 new administration to pursue social harmony.
"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.
His call comes amid concerns in Hong Kong over human rights abuses on the mainland, sky-high property prices and the huge numbers of mainland Chinese visitors to Hong Kong.
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 around 10 security personnel.
Several demonstrators were taken away in a police van. A truck draped with black slogans denouncing the bloody crackdown on pro-democracy protesters in Beijing's Tiananmen Square 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.
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.
New Hong Kong leader Leung Chun-ying, known to have close ties to China's Communist Party, delivered his inaugural speech in Mandarin, not the local dialect Cantonese.
After the morning swearing-in ceremony, demonstration organizers put the number of protesters at 400,000, while police said the figure was 65,000. Hong Kong University said up to 112,000 took part.
"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 a construction scandal that has badly hit Leung's 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, 57, a self-made millionaire who has championed grassroots causes such as poverty alleviation and building more public housing.
He now faces a damaging scandal over illegal constructions in a luxury villa. A similar infraction had earlier torpedoed the chances of his election rival, tycoon Henry Tang.
"MINI HONG KONG"
China proffered a raft of economic goodies to Hong Kong to coincide with Hu's visit, including saying 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.
Beijing often uses visits by leaders to announce sweeteners for Hong Kong.
But public "negative" feelings towards the Chinese government are at a record high, according to a 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 was asked by a reporter to explain the Tiananmen Square 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, wearing a hard hat, ignored the question.
Mainland authorities 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.
(Additional reporting by Venus Wu, Lee Chyen Yee, Sisi Tang, Bobby Yip and Clarie Lee; Editing by Nick Macfie and Robin Pomeroy)