Britain says H.K. should be allowed greater democracy.

HONG KONG, March 3 Kyodo

The large-scale peaceful demonstrations in Hong Kong last year showed that the territory is ready for democracy, a report released by the British government said Thursday.

''The large-scale peaceful demonstrations on July 1 were notable manifestations of Hong Kong people vigorously and responsibly exercising their political and civil rights,'' British Foreign Secretary Jack Straw said in the report.

The demonstrations by thousands of people were sparked by Beijing's refusal to grant universal suffrage for the territory's chief executive in 2007 and the Legislative Council, its lawmaking body, in 2008.

''We favor early progress to this end in Hong Kong. We hope the Hong Kong government will take full account of the wishes of the people,'' the biannual report to Britain's parliament on Hong Kong concluded.

This is the 16th of a series of reports prepared by Britain's Foreign and Commonwealth Office to keep the Parliament informed of the latest development of the city since the former British colony returned to China's political sovereignty on July 1, 1997.

The report comes as Hong Kong is awash with rumors of the sudden resignation of its largely unpopular Chief Executive Tung Chee-hwa, who reportedly stepped down because of health reasons. There are still two more years before his current five-year term expires in July 2007.

Neither Beijing nor Hong Kong authorities have confirmed Tung's rumored departure.