The comments from Stephen Young, the new US consul general, came as Beijing and Hong Kong democracy activists are locked in a battle over the pace of political reform in the former British colony, which returned to China in 1997.

"Hong Kong's economic success based on the rule of law and respect for individual freedoms positions it at the forefront of a dynamic, modern China," Young said in a statement announcing his appointment.

"I feel particularly fortunate to work here as Hong Kong maps out the next phase of its democratic development, which will help define the future of (Hong Kong) under 'one country, two systems,'" he added.

Beijing is committed to allow Hong Kong to keep its market economy and British-style legal system until at least 2047, under a policy known as 'one country, two systems.'

Hong Kong's chief executive is currently appointed by a Beijing-friendly election committee, while half of its 60-member legislature is chosen by interest groups allied to China. The remainder are elected by Hong Kong voters.

Direct elections have been promised within the next decade.

In January, five lawmakers quit to force a by-election that they said would highlight the city's desire for direct elections by 2012.

The move angered Chinese officials, who have labelled it illegal and a threat to stability in the city of seven million, which enjoys freedoms not available to people on the Chinese mainland.

Hong Kong's pro-China parties have said they will boycott the May polls.

US-Chinese ties have recently been strained over Internet freedoms, the value of China's currency, US arms sales to Taiwan and President Barack Obama's recent meeting with exiled Tibetan spiritual leader the Dalai Lama.

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