The former British colony was handed over to China in 1997 under a "One Country, Two Systems" governance model, which guaranteed key freedoms and a high degree of autonomy not enjoyed on the mainland.

In previous years, the July 1 anniversary drew demonstrations and marches from Victoria Park. But authorities have cracked down on dissent after huge and sometimes violent democracy protests in 2019.

Lee said "high-level security to safeguard high-quality development" was a top priority for his administration, noting the need to integrate into China's economic blueprint.

"We have endeavoured to trawl for talent," he said, adding that the arrival of over 210,000 workers has boosted the city's competitiveness.

This week also marks the fifth anniversary of Beijing's imposition of a sweeping national security law, under which 76 people have been convicted so far.

Lee's government enacted a separate security law of its own in 2024 saying it was needed to restore order.

"We have rebuilt a safe Hong Kong," Lee said.

However, the European Union said on Monday "the repressive use of the National Security Law has undermined confidence in the rule of law and Hong Kong's international reputation".

"The European Union regrets that additional national security legislation... introduced new offences, increased penalties and further empowered security authorities," it said in a statement.

- Northern Metropolis -

The League of Social Democrats, one of Hong Kong's last remaining opposition parties, disbanded on Sunday citing "immense political pressure" and concern for the safety of its members.

It was the second pro-democracy party to announce plans to wind down this year, after the Democratic Party did so in February.

Outgoing US consul general Gregory May also criticised the Hong Kong government last week for using the security law to target overseas activists.

On Tuesday, Chinese foreign ministry spokeswoman Mao Ning accused "certain Western politicians and anti-China organisations" of "slandering Hong Kong's rule of law".

"Their actions clearly expose their malicious intent to sow chaos in Hong Kong," said Mao, adding that rights and freedoms legally enjoyed by Hong Kong people have been "fully protected".

Hong Kong leader Lee also trumpeted a plan to urbanise land near the border with China, a development known as the Northern Metropolis that will take up a third of the city's total area.

Activists and locals have raised concerns over its potential environmental impact as well as the strain it will put on Hong Kong's public finances.