HONG KONG—When Hong Kong returned to Chinese rule two decades ago, the city was seen as a model of what China might one day become: prosperous, modern, international, with the broad protections of the rule of law.

There was anxiety about how such a place could survive in authoritarian China. But even after Beijing began encroaching on this former British colony’s freedoms, its reputation as one of the best-managed cities in Asia endured.

The trains ran on time. Crime and taxes were low. The skyline dazzled with ever taller buildings.

Those are still true. Yet as the 20th anniversary of the handover is marked on Saturday, that perception of Hong Kong as something special — a vibrant crossroads of East and West that China might want to emulate — is fading fast.

Never-ending disputes between the city’s Beijing-backed leadership and the pro-democracy opposition have crippled the government’s ability to make difficult decisions and complete important construction projects.

Caught between rival modes of rule — Beijing’s dictates and the demands of local residents — the authorities have allowed problems to fester, including an affordable housing crisis, a troubled education system and a delayed high-speed rail line.

Many say the fight over Hong Kong’s political future has paralyzed it, and perhaps doomed it to decline. As a result, the city is increasingly held up not as a model of China’s future but as a cautionary tale — for Beijing and its allies, of the perils of democracy, and for the opposition, of the perils of authoritarianism.

“More and more, there is a sense of futility,” said Anson Chan, the second-highest official in the Hong Kong government in the years before and after the handover to Chinese rule. She blames Beijing’s interference for the city’s woes. “We have this enormous giant at our doorstep,” she said, “and the rest of the world does not seem to question whatever the enormous giant does.”

Others spread the blame more broadly. They point to the opposition’s reluctance to compromise and policies that weaken political parties, including multi-seat legislative districts that allow radical candidates to win with a minority of votes.

“This kind of a political atmosphere will disrupt many of the initiatives that may come along,” said Anna Wu, a member of the territory’s executive council, or cabinet.

A high-speed rail station planned for Hong Kong is a half-finished shell — years after every other major city in China has been linked by bullet trains.

Hong Kong ranks only after New York and London as a centre of global finance, but it has no world-class museums. After 15 years of delays, construction of a cultural district intended to rival Lincoln Center has started, but funding from the legislature could be disrupted in the coming days.

Widespread complaints about test-obsessed schools leaving students ill-equipped to compete against those in mainland China have not led to education reform. Nor has the government found a way to address simmering public anger over skyrocketing rents and housing prices.

Hong Kong was once known for the speed and efficiency with which it built huge planned communities with ample public housing every several years. But it has not managed to do so since Britain returned it to Chinese rule on July 1, 1997.

Hong Kong is still a gem in many ways, a place that is hard not to love, and for its 7.4 million residents, hard to leave.

Narrow ribbons of oceanfront skyscrapers are backed by wooded hillsides protected as country parks. Steel and concrete fade into sylvan trails that wind past lakes and waterfalls, all of it not too far from the city’s cavernous and efficient airport, part of a renowned transport network of subways, buses, trams and ferries.

But the airport was built by the British before they left. So were the institutions that really distinguish the city: the independent courts, the widely respected civil service, the freewheeling press.

Those were preserved under the “one country, two systems” formula that promised Hong Kong a high degree of autonomy when Britain returned it to China. But they have been weakened as the Communist Party increasingly meddles in the city’s affairs, intimidating and even abducting people seen as challenging its interests.

The Umbrella Movement demanding free elections that seized control of downtown streets for 11 weeks in late 2014 is just a distant memory. But sullen resentment of mainland China has spread as Hong Kong’s democratic evolution has stalled.

This spring, a new chief executive for the territory, Carrie Lam, was selected by a committee of about 1,200 residents — mostly allies of Beijing following its instructions.

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Her predecessors tiptoed around tough issues, wary of both offending the Chinese leadership and provoking the public. At the same time, critics say, limited public accountability has allowed incompetence and even graft to spread among officials. The top two government officials from a previous administration have been tried on corruption charges.

Beijing’s allies have a majority in the legislature because half the 70 seats are selected by interest groups mostly loyal to the mainland government. But the other half is elected, and lawmakers who favor greater democracy have won a majority of those seats. The result is gridlock.

Both sides agree that the city will become ungovernable without some kind of political change. But they cannot agree on what to do.

The democrats want a clear road map to universal suffrage — which Beijing promised in 2007 “may be implemented” in 2017 — starting with direct elections for the chief executive. Only when the government is accountable to the public will it have a mandate to tackle the challenges facing the city, they say.

But supporters of Beijing say the problem is too much democracy, not too little.

Lam, who will be sworn in Saturday, acknowledged “a certain degree of truth” in the argument that the lack of a political overhaul was making it more difficult to address issues like housing, education and infrastructure.

But she added, “If we were to have universal suffrage tomorrow, would all these problems disappear? I don’t think so.”

Three years ago, Beijing presented Hong Kong with a proposal to allow residents to elect the chief executive, but only from a slate of candidates approved by a nomination committee under its control. The pro-democracy forces rejected the offer, holding out for free elections without such a limit, and Beijing’s refusal to budge prompted the Umbrella Movement protests.

It was a pivotal moment for Hong Kong, with all sides letting a chance at compromise slip by and digging in for what has been a prolonged stalemate.

The pro-democracy camp’s biggest mistake may have been believing that President Xi Jinping intended to guide China toward a more pluralistic future.

After nearly five years in power, he has proved to be a committed authoritarian who considers political liberalization a threat.

There seems little hope that Beijing will make Hong Kong an offer better than the one it put forward three years ago. Jasper Tsang, the recently retired president of the legislature and a longtime ally of Beijing, said the attitudes of the Chinese leadership toward the city had hardened.

“People are telling me there won’t be a second chance,” he said.

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