* Lam’s annual policy speech disrupted

* Lam offers housing crisis policy, defends government

* Lam says has held ‘close door’ talks over unrest

* Pro-democracy lawmakers call for Lam’s resignation

* Suspension of legislature stops extradition bill withdrawal

* Hong Kong pro-Beijing party unhappy with Lam speech (Adds pro-Beijing party comment, details on extradition bill)

By Clare Jim and Twinnie Siu

Lam, who had to broadcast the annual address via a video link after the rowdy scenes in the city’s assembly, hoped to restore confidence in her administration and address discontent after four months of often violent anti-government protests.

She had to halt her initial attempts to deliver the address after pro-democracy lawmakers called out for “five demands, not one less” and projected the protest rallying cry onto a backdrop behind her.

The protesters’ demands include universal suffrage and an independent inquiry into what they say has been excessive force by police in dealing with demonstrations.

In her policy statement, Lam was unapologetic about her government’s response to the protests, which has seen her introduce colonial-era emergency laws and riot police fire thousands of rounds of tear gas and hundreds of rubber bullets at brick and petrol-bomb throwing activists.

“Any acts that advocate Hong Kong’s independence and threaten the country’s sovereignty, security and development interests will not be tolerated,” she said.

“Despite the stormy times and overwhelming difficulties Hong Kong is experiencing, I believe that so long as we accurately adhere to the principle of ‘one country, two systems’, we will be able to get out of the impasse.”

The protesters are angry at what they see as Beijing’s tightening grip on Hong Kong, which was guaranteed 50 years of freedoms under the “one country, two systems” formula under which Britain returned the city to China in 1997.

Beijing rejects the charge and accuses Western countries, especially the United States and Britain, of stirring up trouble. The unrest poses the biggest popular challenge to Chinese President Xi Jinping since he came to power in 2012. He warned that any attempt to divide China would be crushed.

Lam later told a news conference that she had held “closed door” meetings with some members of the protest movement and when the unrest ended she would hold more to address the political situation.

RESIGNATION CALLS

Pro-democracy lawmaker Tanya Chan said Lam should resign for failing to address the protesters’ five core demands.

“Both her hands are soaked with blood. We hope Carrie Lam withdraws and quits,” an emotional Chan said at a news conference. Lam has rejected calls to step down.

In her news conference, the Beijing-backed Lam rejected two of the protesters’ five demands – amnesty for those charged and universal suffrage – saying the first was illegal and the second beyond the chief executive’s power.

Even the pro-Beijing Democratic Alliance party was unhappy with Lam’s speech, saying it lack concrete measures to get Hong Kong back to normal.

“It’s a conservative, procrastinating blueprint with little new ideas. Apart from calling for people to abide by (Hong Kong’s) core values, we cannot see any concrete measures,” said the party’s chairwoman Starry Lee.

Hong Kong’s unrest was ignited by a China extradition bill, which would have seen residents sent to Communist Party-controlled mainland courts for trial. Lam has said the bill is withdrawn, but the suspension of the legislature on Tuesday meant it could not be formally withdrawn.

Authorities have arrested more than 2,300 people since June when the unrest grew, scores of them teenagers, some as young as 12 and the oldest 83. Two people have been shot and wounded and thousands injured.

A Norwegian lawmaker, Guri Melby, tweeted that she had nominated the Hong Kong people for the 2020 Nobel Peace Prize for their stand for freedom of speech and democracy.

HOUSING CRISIS

Hong Kong’s boasts some of the world’s most expensive real estate and the inability of many young people to get a place of their own has fuelled protests.

Lam’s housing policy is one of the boldest in recent years, to take back large tracts of land held by a handful of powerful developers and create public housing.

“We are determined to create home ownership opportunities for people of different income groups such that they will happily make Hong Kong their home,” Lam said.

Lam said about 700 hectares of land in the New Territories would be brought back into public use under what is known as a land resumption ordinance. More than half of the land would be taken back in the next few years, with a further 450 hectares earmarked for “resumption”.

Lam faces a complex task in delivering her housing policy, which will take years to see any new housing created. No leader has take back land from private developers since the handover.

Pro-establishment lawmaker Abraham Shek, who represents the real estate sector, rejected the policy on Tuesday. “It is not for the government to meddle with the market forces,” he said.

Major developers, including Henderson Land, New World Development and Sun Hung Kai Properties , are sitting on “no less than 1,000 hectares” of agricultural land, according to government estimates. (Reporting By Donny Kwok, Clare Jim, Sarah Wu, Twinnie Siu, James Pomfret and Jessie Pang; Writing by Anne Marie Roantree, Farah Master and Michael Perry; Editing by Robert Birsel, William Maclean)