By James Pomfret and Anne Marie Roantree
HONG KONG, July 1 (Reuters) - China's president Xi Jinping on Friday swore in John Lee, 64, as the city's next chief executive - the first security policy expert to run the China-ruled international financial hub since its handover from Britain in 1997.
Lee, 64, a former probationary police inspector who rose to become deputy commissioner over a 33-year career, has been a divisive figure in Hong Kong in recent years.
Pro-democracy campaigners and overseas activists describe Lee as a hardliner and staunch Beijing loyalist who has faithfully implemented Xi's tougher, authoritarian grip on what was once China's freest city.
In his inaugural speech as Hong Kong leader, Lee highlighted his twin political and economic priorities; saying Hong Kong needed to enhance its competitiveness in finance, trade and shipping while ensuring stability.
"The rule of law is a cornerstone and core value of the city's success," Lee told an audience, including Xi, in the same harbourfront convention centre where, a quarter of a century ago, British officials handed the city back to China.
Before Lee, all of Hong Kong's leaders were either career civil servants with broad policy expertise, or business leaders.
All have struggled to reconcile the needs of China's Communist Party leaders with the desire of many regular Hong Kongers for Western-style freedoms and democracy under a "one country, two systems" style of governance that promised the city wide-ranging autonomy when it was handed back to China in 1997.
In 2019, when Lee was secretary for security in charge of all disciplinary forces, he was among leaders who tried to ram through a contentious bill to allow extraditions to mainland China for trial, despite growing public anger and protests.
He told a business group at the time that Hong Kongers had nothing to fear from the mainland's Communist Party-controlled courts. "He told us they were fair, just and transparent," one source at the meeting told Reuters. "Our jaws hit the floor."
The bill was later suspended but by then the demonstrations had snowballed into a full-blown movement demanding full democracy and greater autonomy from China.
In August 2020, after China imposed a national security law on Hong Kong, Lee - who helped set up a new national security police division with unprecedented investigative powers - was sanctioned by the U.S. alongside 10 others for "fundamentally" undermining freedoms and allowing "China's security services to operate with impunity".
Lee and Chinese officials have repeatedly defended the law, saying it has restored stability.
In 2021, Lee was promoted to the city's No. 2 job, paving the way for his endorsement as the city's next leader in May by a 1,500-member committee stacked with Beijing loyalists.
Hong Kong's embattled democrats - marginalised, jailed or forced into exile - expect freedoms to narrow further under Lee, and converge more with mainland China.
Avery Ng, an activist recently released from prison, said police had targeted more than 10 members of his group, the League of Social Democrats, with search warrants, surveillance and warnings not to protest during Xi's visit to Hong Kong.
"This is the first July 1 ever that we've not had any protest," he told Reuters.
Lee, who says safeguarding national security remains his "fundamental mission", is aiming to enact more security laws this year, including against sedition, treason and fake news.
Although Lee has criticised sanctions as the acts of "some bullying countries", there are signs he is trying to mend some diplomatic ties and Hong Kong's battered international image.
"He is generally warm and engaging," one senior Western diplomat who has met Lee recently, told Reuters. "But if the conversation goes anywhere near national security or collusion, his whole face and expression and demeanour changes." (Additional reporting by Meg Shen and Greg Torode; Editing by Gerry Doyle)