Hong Kong's leader, Tung Chee-hwa, is recommending that the territory change the way it chooses its next leader, but he has avoided endorsing greater democracy. China will have the final say on the matter.
Chief Executive Tung Chee-hwa says his report to China's parliament recommends electoral changes within the next three years.
At a news conference, he explained his report on selecting the city's chief executive and members of its Legislative Council. Mr. Tung said, "The methods of selecting C.E. (chief executive) and Legco (legislative council) members in 2007 and 2008, respectively, should be amended so that Hong Kong's political development can be taken forward."
He says the reforms must be gradual, but he did not say what the changes should be.
Mr. Tung's decision launches a process toward possible political reform. Democracy groups in the city have long demanded universal suffrage - something not enjoyed anywhere in China.
During the past several months, there have been several protests calling for greater democracy, and more openness in government. Last July, officials in both Hong Kong and Beijing were surprised when half a million people took to the streets to protest security legislation that many feared would restrict Hong Kong's civil liberties.
Full democracy is set out in Hong Kong's mini-constitution, called the Basic Law, but there is no specific timetable for it.
Mr. Tung was chosen by a committee comprised largely of the city's pro-Beijing elite. He is the only leader the former British colony has had since it was returned to Chinese rule in 1997.
Some of the city's legislators are popularly elected, but slightly more than half were selected by interest groups.
Beijing declared last week it has the ultimate power to decide whether to allow the changes, as well as the pace of any reforms. Analysts say China is not likely to allow universal suffrage by 2007.
Democracy groups criticized Mr. Tung for not holding public consultations before submitting his report to Beijing.
Hong Kong is administered under the so-called one country, two systems principle - which allows local residents to enjoy far more freedom than people do in Communist China.