Accompanied by his wife and a delegation of senior Chinese officials, he will grace celebrations this weekend to mark the 10th anniversary of Hong Kong's handover from British to Chinese rule on July 1, 1997.

He will also preside over the swearing in of Hong Kong Chief Executive Donald Tsang and his new Cabinet tomorrow.

Mr Hu, making his first visit here as China's top leader, brought a 'present' - a trade agreement that further eases regulations to do business between Hong Kong and the mainland.

'I'm very happy with Hong Kong's performance in the last decade and it shows the 'one country, two systems' policy is working well,' Mr Hu said at the airport, where he was greeted by Mr Tsang.

The 'one country, two systems' arrangement is designed to let Hong Kong enjoy a high degree of autonomy,

Observers noted that Mr Hu's three-day visit is unusually long.

'Chinese leaders, not to mention the President, do not stay for more than a day in any particular place,' said City University political science professor James Sung.

'It is a show of good will and sincerity, and reaffirms Hong Kong's position as a key financial hub for China.'

Yesterday afternoon, Mr Hu took off his jacket and tie to play a game of ping pong with a 13-year-old boy and visited two Hong Kong families before attending a dinner hosted by Mr Tsang.

Mr Hu's presence is a major boost for Hong Kong, which is working hard to position itself as China's international financial centre.

The latest trade agreement, which the two sides signed yesterday, allows Chinese fund management firms to set up subsidiaries here from next year and makes it easier for smaller Hong Kong banks to take a stake in banks on the mainland.

Also under the agreement, which is an extension of the Closer Economic Partnership Agreement (Cepa) introduced in 2004 to shore up Hong Kong's economy, Hong Kong doctors can practise on the mainland while tour operators, hospitals and other businesses here will be given wider access to mainland markets.

Official figures showed the Cepa has, between 2004 and last year, created 36,000 new jobs for Hong Kong residents, and attracted HK$5.1 billion (S$997 million) in additional capital investment for the city.

It has also created 16,000 new jobs for mainlanders, and attracted HK$9.2 billion in additional capital investment by Hong Kong companies on the mainland.

Hong Kong's economy has, thanks largely to the central government's policies, recovered strongly from catastrophes such as the Asian financial crisis, the Sept 11, 2001 terrorist attacks, and the deadly Sars and bird-flu outbreaks that followed.

Its gross domestic product has grown by more than 7.5 per cent in each of the past three years.

But not all the people welcomed the Chinese leader. Pockets of people, some of them demanding democracy for Hong Kong, protested against his visit.

vincec@sph.com.sg