Hong Kong: Chinese President Xi Jinping has warned Hong Kong's youth-led democracy movement not to cross China's red line, in a tough speech to mark the 20th anniversary of the Hong Kong handover.

He implicitly rejected the criticism that Beijing was increasingly interfering in Hong Kong's affairs, despite the promise given in 1997 that Hong Kong could keep a "high degree of autonomy" under the One Country, Two Systems policy.

A pro-democracy activist is taken way by police after the group's march clashed with pro-China counter protesters. Credit:AP

"The people of Hong Kong enjoy more extensive democratic rights and freedoms than at any other time in its history," he said. Hong Kong had maintained its "capitalist system and way of life and its laws have remained basically unchanged".

One Country, Two Systems was designed to firmly uphold China's sovereignty, according to Mr Xi. He warned there had been "new developments", and the Hong Kong government needed to respond by improving its systems to ensure national sovereignty and security.