Sixteen years after Hong Kong returned to Chinese rule, public discontent with Beijing is swelling and protesters have been rallying around an unexpected symbol -- the British colonial flag.

Tens of thousands have taken to the streets in recent months in marches against Chief Executive Leung Chun-ying, who took over from Donald Tsang last July after being elected by a 1,200-strong pro-Beijing committee.

On several occasions the old blue flag, which incorporates the Union Flag, has been flown by protesters on the streets of what is becoming an increasingly divided Hong Kong, both embarrassing and infuriating Beijing.

While Leung's supporters say he is tackling pressing social issues such as affordable housing and the strain on public services, his critics see him as a stooge for Beijing and are angry over a widening poverty gap.

In September, he backed down from a plan to introduce Chinese patriotism classes in schools, which had incited mass protests and was viewed as an attempt to brainwash children into accepting doctrines taught on the mainland.

The founder of a group mobilising Hong Kongers to fly colonial flags said it did so because the city was worse off after 16 years of "encroachment" by Beijing, stressing it was not because of any desire to see Britain rule again.

"Our freedom and everything else has gone downhill since (the handover)" said 26-year-old Danny Chan from the "We're Hong Kongese, not Chinese" Facebook group, which has been "liked" by nearly 30,000 people.

Hong Kong's semi-autonomous status enshrines civil liberties not seen on the mainland, including the right to protest, until 2047 under the "One country, two systems" handover agreement.

Chan cited housing prices that stubbornly remained among the world's highest and the widening income gap between the rich and the poor as factors driving the increasingly frequent protests in the city.

Many Hong Kongers blame increased immigration from the mainland for high house prices and overcrowding in local hospitals.

Chan said that the flags symbolised anger and the perceived erosion of the rule of law in Hong Kong since 1997.

"Hong Kong's core values and the rule of law have been gradually destroyed until there is almost nothing left," argued the computer engineer, who waved the flag at a mass rally on January 1 to demand Leung step down.

Dixon Sing, political analyst at Hong Kong's University of Science and Technology, said the protesters "believe the Chinese Communist Party has been undermining those core values and reneging on the promise of giving Hong Kong 'two systems'".

-- "Misguided" notions --

The increased visibility of the old emblem has sparked tensions, at a time when China is ushering in a new batch of leaders who yearn for order and stability in the Asian financial hub.

The British Council, which promotes cultural and educational ties overseas, unwittingly became embroiled in the controversy recently when advertisements for an education fair bearing the Union Jack became the centre of attention.

Comments such as "Great Britain built Great Hong Kong!" were posted on the British consulate's Facebook page and linked to the posters.

The advertisements were hastily removed due to the possibility of "misinterpretation", a British Council spokeswoman said.

The waving of the old flag has drawn criticism from Chen Zuoer, the former No.2 mainland Chinese official in Hong Kong, who reportedly said last year that it "should be sent to history museums".

Other critics, including those from the city's pro-democracy political camp, said any "good old days" notion is largely misguided, as corruption and malpractice were once widespread before a major clean-up in the 1970s.

"During colonial times, there was no freedom and our rights were denied but in the late 1980s, the government won people's trust and it was seen as clean," said Avery Ng from maverick lawmaker "Long Hair" Leung Kwok-hung's League of Social Democrats party.

The party has called for full democracy in Hong Kong to replace the current system.

"I understand the current sentiment but this is very sad for Hong Kong that people would rather look back at colonial times."