HONG KONG, Sept 19 (Reuters) - When Britain handed Hong Kong back to China in 1997, it was with the promise that the wealthy city of 7 million would be free to choose its leader some day.

Ten years on, Hong Kong has been allowed some tiny steps towards democracy but full universal suffrage remains a distant goal for one of the world's freest economies.

A pivotal five-yearly Communist Party Congress opening in Beijing in mid-October has raised hopes in the city for more political reform, but there are few signs that the Party is in any hurry to speed up that process.

In 2004, China's leaders made a controversial decision to rule out direct elections in the city until at least 2012.

But with 2012 the year President Hu Jintao is likely to retire, a new, untested leader is unlikely to begin his term by dabbling in the dangerous waters of political reform.

Hong Kong's economy is healthy, its stock market is soaring and employment is at its highest in nearly a decade, giving Beijing little reason to tinker with the system and risk instability or calls for similar political opening on the mainland.

"The political reality tells us, even those leaders who are extremely open, before their time is ripe, they can't do much," said Johnny Lau, a veteran China watcher based in Hong Kong.

"Don't bank your hopes on them becoming suddenly very enlightened. That won't happen."

ONE PARTY, TWO SYSTEMS

Pressure for direct elections has grown since Chinese rule was restored. The potential of its people to influence Beijing was demonstrated in a 2003 protest march that drew half a million into the streets to shout down an anti-subversion law.

But lately, some China watchers believe officials have been trying to steer Hong Kongers away from expecting too much too soon, meaning 2017 is, perhaps, more realistic.

In the past decade, Hong Kong has enjoyed a high degree of autonomy under Beijing's "one country, two systems" formula.

But its leader is chosen by an electoral college largely sympathetic to Beijing and half the 60-seat legislature is selected by special interest and industry groups.

Hong Kong's mini-constitution, the Basic Law, states that direct elections are the "ultimate aim", but since 1997 the city has made only incremental steps on political reform and Beijing's heavy hand has kept progress in check.

The head of China's parliament, Wu Bangguo, stirred controversy in June by saying Hong Kong would only get as much authority as Beijing wished to grant it -- comments interpreted as an attempt to quash mounting calls for swift reforms.

"We see no signs that the Chinese leadership wants to push for political reform, it's more a tightening," said Joseph Cheng, a political scientist at Hong Kong's City University.

"If the Communist Party is not so interested in reforms within (mainland) China, the probability for political reforms outside China is limited," added Cheng, a member of the Civic Party, one of Hong Kong's small pro-democracy parties.

Poll after poll shows that Hong Kongers favour full democracy at an early date, and many remain hopeful of universal suffrage.

But even by 2012, when Hu is likely to step down, China's new leaders are more likely to be focused on consolidating power -- much as Hu has done -- and putting out domestic fires, rather than helping Hong Kong become more democratic, Cheng said.

HOPE YET

Still, there are some signs that the city's politics are becoming more responsive to the public, despite their lack of direct say in their leadership.

Former chief executive Tung Chee-hwa resigned unexpectedly in March 2005, two years before his time was up, after a tenure marked by policy gaffes, economic recession and unpopularity with a public who saw him as a Beijing yes-man.

Last year his successor, Donald Tsang, was forced to compete with democratic challenger Alan Leong after Leong won enough nominations by an 800-member electoral committee to run. It was Hong Kong's first contested leadership election.

Growing calls for concrete progress forced Tsang to promise to resolve the issue in the next five years.

Whatever the case, experts say any future model for universal suffrage in Hong Kong, whenever it comes, would display distinct "Chinese characteristics".

"They have to make decisions about democratisation," said David Zweig, director of the Center on China's Transnational Relations at the Hong Kong University of Science and Technology.

"It's certainly pushing them, they wouldn't otherwise be moving forward on this ..."