In an unusual move, the Home Affairs Bureau has used an anti-establishment art form - graffiti - to promote pro-Beijing messages on the handover anniversary.
The graffiti was painted on a purpose-built wooden hoarding spanning the entire length of a Happy Valley subway.
But the project has also forced out several street sleepers who have called the walkway their home for years.
A spokesman for the Wan Chai District Office said it organised a graffiti competition for young people "to commemorate the occasion and provide a platform for youngsters to showcase their creativity".
He said the subway was chosen because it was "easily accessible and of sufficient width to accommodate the display panels without compromising pedestrians' access".
The eight artworks include a large panel with the word "glorify" written in capital letters with a red and yellow colour theme.
It is decorated with the stars on the national flag and a Bauhinia petal from the Hong Kong flag.
The project began in April and the panels were put up in August. But Annar, a Thai woman who came to Hong Kong in 1998 to work as a domestic helper but who has been homeless since 2006, did not understand the graffiti's purpose.
"I didn't know what was happening when they [the people who installed the panels] came. I am sleeping on the floor and they do this. What's the point of these pictures?" she said.
Annar, 39, has lived in the subways between Queen's Road East and Happy Valley racecourse for six years after she lost contact with her estranged husband and two children.
"I don't have a home so this is my home," she said yesterday in a subway adjacent to the graffiti.
Another panel features the words "Hong Kong" floating above the harbour with the bauhinia image incorporated in the letters. A Chinese flag flies between the two words.
Other handover anniversary references include "Return to China", "Back to China" and "Paint out my future". The wall also features a section that says "No littering" and "Keep clean".
Wong Hung-sang, from social welfare group St James' Settlement, said the decision to put the panels in a subway that housed homeless people raised questions about the project's agenda.
"It's hard to say why the government did it. What is its purpose?" he said.
Just last week, the government said its newly revived Commission on Poverty would set a poverty threshold as a way to tackle the problem.
A spokeswoman for the Social Welfare Department said the social workers would continue to visit and assist street sleepers in the subways.