By Damian Grammaticas
BBC Hong Kong correspondent
But the events have been scaled down because the government is facing serious economic problems and wants to save money.
Meanwhile, almost 100 members of the Falun Gong meditation movement were deported from Hong Kong airport when they arrived to join demonstrations in the territory.
Five years on from the end of colonial rule, there are official events to mark the occasion.
China's President Jiang Zemin is attending.
But nobody in Hong Kong is in a mood to celebrate.
In the past five years, the territory's economy has taken a battering.
Property prices - a major source of wealth - have fallen by half, unemployment has tripled, and many people's wages are being cut.
There is a real sense of pessimism that Hong Kong has lost its way.
And there are fears that the territory's freedoms, supposedly guaranteed for 50 years, are being whittled away too.
Ninety Falun Gong followers have been detained at Hong Kong's airport.
They were seeking to stage protests against the group's persecution in mainland China.
A few days ago Harry Wu, a leading Chinese dissident was refused a Hong Kong visa.
And the Hong Kong government is busy prosecuting Falun Gong members and local political activists for staging public demonstrations.
Critics say they are targeted prosecutions aimed at silencing dissent, and are an abuse of the legal system.
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