By Agencies

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China is celebrating its National Day just weeks before a once-in-a-decade handover of power within the ruling Communist Party.

A dawn flag-raising ceremony in Tiananmen Square will start the 63rd National Day celebrations on Monday.

Outgoing President Hu Jintao; Wen Jiabao, the current and outgoing prime minister; and Xi Jinping, the future president, will lay flowers at the Monument to the People's Heroes in Beijing.

The festivities are also taking place against the backdrop of a scandal that has brought down powerful ruling party politician Bo Xilai.

There are also tensions with Japan over disputed islands in the East China Sea.

In Hong Kong on Monday, police blocked about 60 demonstrators from a flag-raising ceremony, the Reuters news agency reported.

Speaking from Beijing, Willem Van Kemenade, a China analyst, said: "[China's] spectacular economic development is contrasted with the lack of political development. The talk has been about political reform, liberalisation if you wish, but almost none of that has happened.

"China is still a dictatorship without a dictator," he said, "because the president is a rather colourless imageless figure."

The National Day festivities are also being overshadowed by a territorial dispute with Japan over islands in the East China Sea.

Despite international pressure, both countries refuse to back down over the dispute that puts into question the sovereignty of the islands known as Senkaku in Japan and Diaoyu in China.

The dispute has brought nationalism and patriotism to the fore, and caused sometimes violent protests in China targeting Japanese businesses.

The dispute is testing perhaps the most important economic relationship in Asia, between the world's second- and third-largest economies.