Hong Kong's government scrapped plans to introduce controversial security legislation which sparked massive protests and triggered the territory's worst political crisis since the 1997 handover.
Chief executive Tung Chee-hwa said moves to revive the legislation later this month had been indefinitely postponed because there was still widespread concern over the law, which critics say threatens Hong Kong's political, religious and media freedoms.
"In order to give people enough time to understand the law, we decided to postpone it," Tung told reporters at a press conference to announce the dramatic policy climbdown.
The initial security bill, drawn up under Article 23 of Hong Kong's post-1997 constitution, was shelved by Tung earlier this year after more than 500,000 people marched through the streets in protest here on July 1.
The march and subsequent large-scale demonstrations led to the resignation the government's two most unpopular ministers, Financial Secretary Antony Leung and Security chief Regina Ip.
Tung told reporters Friday there was no timetable for re-introducing the bill and stressed no replacement legislation would be put forward without extensive public consultation.
He said the government had also decided to postpone the bill in order to help the recession-hit economy, which was battered by the Severe Acute Respiratory Syndrome (SARS) outbreak between March and June.
"We believe the community needs to focus on the economy which has had a hard time with SARS. We need to get the economy going again and the whole community needs to be focused on reviving the economy," he said.
Pressure had mounted on Tung's administration to back down on the security bill after parties across the political spectrum expressed disquiet over the legislation.
Legislator Lee Chuk-yan, who spearheaded the massive July protests, said the announcement marked a "victory for the thousands of people who forced the government to make an about-turn."
"As no timetable has been set, we believe the government can now go back and carefully take into account views raised by the people," he said.
Analysts said the decision to postpone the legislation indefinitely must have been taken with Beijing's approval.
"It is a strategic move made by both Beijing and the Hong Kong government to win the hearts and minds of the people," said Sonny Lo, political analyst at the University of Hong Kong.
"The objective is to rescue the declining popularity and the legitimacy of Tung's government," he said, noting that Beijing has promised economic measures to help Tung's beleaguered administration since the crisis.
Paul Harris, political commentator at Lingnan College, said the postponement would buy Tung precious time.
"Tung can only benefit through delay," Harris said. "With Beijing's support, and in order to maintain order, it is better not to force Article 23 down people's throat.
"With the economy gradually improving, and the news is not bad nowadays, it helps the case," he said, adding "it will make the job much easier now."
Law Siu-kai, director at Hong Kong Human Rights Commission, said he believed Tung was "echoing" orders from Beijing, in delaying the legislation.
"Tung's decision will help protect the image of Beijing as well as enhancing the position of pro-China elements in Hong Kong," said Law. "If not, Tung's governance will be in crisis," he added.
However, Tung reiterated that Hong Kong was constitutionally obligated to legislate Article 23, adding that the security bureau had set up a taskforce to conduct a further review of the bill.
Authorities in Beijing had little comment on the withdrawal of the law.
"We don't have any special reaction to this," a spokesman at the Hong Kong/Macau Affairs Office of the State Council, China's cabinet, said. China's foreign ministry declined to comment on the issue.
Hong Kong is required, under the terms of the 1997 handover from Britain to China, to enact national security legislation banning treason, sedition, subversion and the theft of state secrets.
Critics are concerned China could use the law to suppress freedoms, stifle reporting of official abuses, prevent protests against the government and block access to legal representation.