HONG KONG - CHINA'S Vice-President said the 'one country, two systems' principle had proved right for Hong Kong on Monday as hundreds of campaigners protested for democracy in the city.

Mr Xi Jinping, who is on a three-day trip to Hong Kong, told a welcome reception that Beijing fully backed the city's economic development and praised its people for overcoming tough times.

'Time has already and will continue to prove that the 'one country, two systems' principle is completely right. It has a strong life,' he told guests at a dinner hosted by the government at the city's Island Shangri-La hotel.

But the protesters criticised police for keeping them too far away from the hotel, making it almost impossible for Mr Xi to hear their calls, according radio station RTHK.

Hong Kong, a wealthy financial centre, was returned to China by colonial power Britain in 1997 to become a special administrative region. Under the 'one country, two systems' principle, it is a Chinese city but boasts liberal legal and economic arrangements, which were brokered before the handover.

Mr Xi, who arrived on Sunday to monitor preparations for hosting the Olympic equestrian events next month, praised the achievements Hong Kong has made since its return to Chinese rule.

He said that with the support of Hong Kong and Beijing authorities, it has 'conquered many serious difficulties and challenges brought by incidents such as the Asian economic crisis and the outbreak of Severe Acute Respiratory Syndrome (Sars)'.

The Vice-President pledged Beijing's full support in matters beneficial to Hong Kong's economic development and livelihood. He also revealed the city's service industry would be able to extend into the mainland - especially Guangdong province - under an agreement to be signed by both sides.

Mr Xi also thanked Hong Kong's efforts in relief work in Sichuan province, which was hit by a 8.0-magnitude earthquake on May 12, leaving 87,000 dead or missing. -- AFP