A former Hong Kong leader faces misconduct charges over a luxury apartment in mainland China, making him the highest-ranking official to be formally arrested by anti-corruption investigators in the Asian business hub.

Donald Tsang has been charged with two counts of misconduct in public office, the city's corruption watchdog, the Independent Commission Against Corruption, said.

A grim-faced Mr Tsang, 70, appeared briefly at a magistrates' court for a preliminary hearing, accompanied by his wife.

The allegations date from before Mr Tsang left office in June 2012 and relate to a discounted penthouse rental in neighbouring Shenzhen in mainland China offered by a wealthy friend for Mr Tsang's retirement.

It is one of several recent cases that have shaken public confidence and raised concerns about cosy ties between wealthy tycoons and Hong Kong's leaders. In a separate corruption case last year, a former Hong Kong chief secretary - the second-highest ranking official - and a co-chairman of one of the city's biggest property developers were given prison sentences.

Mr Tsang became the southern Chinese city's second post-colonial leader, known as the chief executive, in 2005. He was also financial secretary during the former British colonial administration, when he led the effort to successfully defend the city's currency peg against speculators during the 1997-98 Asian financial crisis.