China is celebrating its National Day just weeks before a once-in-a-decade handover of power within the ruling Communist Party.

A dawn flag-raising ceremony in Tiananmen Square will kick off the 63rd National Day celebrations on Monday.

Outgoing President Hu Jintao; Wen Jiabao, the current and outgoing prime minister; and Xi Jinping, the future president, will lay flowers at the Monument to the People's Heroes in Beijing.

The festivities are also taking place against the backdrop of a scandal that has brought down powerful ruling party politician Bo Xilai.

There are also tensions with Japan over disputed islands in the East China Sea.

In Hong Kong on Monday, police blocked about 60 demonstrators from a flag-raising ceremony, the Reuters news agency reported.

Al Jazeera's Divya Gopalan, reporting from Hong Kong on Monday, said this was a crucial period for China.

"There were speeches on Saturday when Premier Wen said that China was ushering in a new era, and they were going to build on previous achievements and push forward with development. All very positive," she said.

"He also mentioned that China was facing a period of opening up, and much development is still needed."

Speaking to Al Jazeera from Beijing, Willem Van Kemenade, a China analyst, said: "[China's] spectacular economic development is contrasted with the lack of political development. The talk has been about political reform, liberalization if you wish, but almost none of that has happened.

"China is still a dictatorship without a dictator," he said, "because the president is a rather colorless imageless figure."

Leadership change

Our correspondent said the big leadership change that happens once every decade will take place on November 8.

"The reason this will be particularly looked at is because China has had a period of instability, its economy has been moving in different directions," Al Jazeera's Gopalan said.

"It has shown as a lack of coherence within the Communist Party that people outside have picked up on. That came up in particular with Bo Xilai."

Bo was expelled from the party in a scandal that has embarrassed the Chinese government.

He was tipped for a top position until he got caught up in a scandal involving the murder of a British businessman. He will now face charges for abuse of power, bribe-taking and improper relations with a number of women.

The National Day festivities are also being overshadowed by a territorial dispute with Japan over islands in the East China Sea.

Despite international pressure, both countries refuse to back down over the spat that puts into question the sovereignty of the islands known as Senkaku in Japan and Diaoyu in China.

The dispute has brought nationalism and patriotism to the fore, and sparked sometimes violent protests in China targeting Japanese businesses.

The dispute is testing perhaps the most important economic relationship in Asia, between the world's second- and third-largest economies.

PHOTO CAPTION

People wait for their trains during the first day of China's Mid-Autumn festival and National Day at Hongqiao train station in Shanghai October 1, 2012.

Aljazeera