Lee, who appeared unfazed by the protestors, stressed that the future of the Special Administrative Region (SAR) was in the hands of its people and leaders.

"If they can persuade the leaders in Beijing that they are willing to work within the framwork of the PRC (People's Republic of China) and SAR constitutions, there could be advances that will enable the territory to have more representative and participatory government," Lee said.

He warned that failure to find a consensus would result in Hong Kong "locked in a frustrating process of attrition with the Centre."

"The way forward is to forge a consensus on goals that are possible and achievable within the limits of the power structure of the PRC and the SAR," Lee said after being conferred the title of Doctor of Laws, honoris causa.

Lee however was confident the SAR and mainland would move closer together as China's political and economic development evolved.

"Over the next 46 1/2 years, both sides, the mainland and Hong Kong will converge. It will be another two generations before you meet them in one country and one system."

Under the 1984 Sino-British declaration, Hong Kong was guaranteed autonomy for 50 years commencing from the handover in July 1997.

"Look at the changes China has undergone in the one generation since chairman Mao died. If China continues at the same pace, that eventual convergence will not be that difficult," he said.

But Lee also recognised the wide gulf that existed between the expectations of the Hong Kong people on the one hand and its Chief Executive Tung Chee-hwa and Beijing on the other.

"The gap between the expectations of Beijing's leaders and Hong Kong's people is simply too wide" and it must be straddled, he said.

Lee, Singapore's founding father and former prime minister, questioned why people in Hong Kong were happier under decades of British rule than now, "when they have more say on how they are governed."

"They accepted their subject status in a British colony. Now they seem less contented with their lot, when Hong Kong has a Chinese chief executive, not a British governor," he said.

He also said that three and a half years after Hong Kong's handover to China, "the heavy hand of China is not in evidence in Hong Kong."

Though he noted that Hong Kong had "developed a penchant for protests and demonstrations as if to prove that it is still as democratic as it was in the last days of British rule."

Protests were mounted by activists outside the Chinese University as Lee prepared to receive his doctorate.

But, despite requests from protestors for those attending to turn their backs and withold applause, the ceremony ran without hitches.

Before the ceremony, students and pro-democracy activists distributed leaflets labelling Lee a "dictator".

Four activists from the radical April 5th Movement group positioned themselves at the university gate, using loudhailers to denounce the ceremony.

But Southeast Asia's elder statesman was whisked through another entrance under tight security.

The campaigners called Lee "a notorious dictator" saying his "authoritarian paternalism has deprived Singapore of true democracy in spite of regular general elections".

"The rule of law is little more than a facade as the ruling party has constantly abused it to crush dissent," a statement posted on the Internet said.