A pleasure boat collided with a passenger ferry and sank off Hong Kong, leaving 36 people dead and sparking a frantic overnight search and rescue effort, officials said Tuesday.

More than 120 passengers and crew were on the Hong Kong Electric company's vessel to watch a national day fireworks display in Victoria harbour Monday evening when the collision occurred near Lamma island.

Scores of people were thrown into the choppy waters and the company vessel sank within minutes, leaving only its bow protruding from the waves.

"Twenty eight were certified dead at the scene while eight others were certified dead upon arrival (at) hospitals," the government said in a statement, raising an earlier death toll by 11.

"Over 100 people were sent to five hospitals during the incident, nine of them have sustained serious injuries or are in critical condition.

"Rescue action will continue as Fire Service Department (FSD) cannot rule out that there are still people inside the vessel or missing."

All of the dead and most of the injured are believed to have been passengers or crew of the Hong Kong Electric vessel, which was reportedly packed with staff and their families hoping to enjoy the spectacular fireworks display.

Rescue teams in boats and helicopters spent the night scouring the sea around the site of the accident for signs of survivors, while dive teams entered the sunken boat.

"The low visibility and many obstacles on board... made it difficult for rescue," the FSD said.

Survivors were taken by boat to Hong Kong island, some three kilometres (two miles) to the east, where a fleet of ambulances whisked them to hospital.

Local television station RTHK reported on its website that children were among the dead.

"After 10 minutes out a boat crashed into ours from the side at very high speed. The rear... started to sink," a survivor was quoted as telling the South China Morning Post after he was brought to shore.

"I suddenly found myself deep under the sea. I swam hard and tried to grab a life buoy. I don't know where my two kids are."

Another survivor, a woman, said: "I swam for a long time to reach the surface and swallowed a lot of water. Then I found a rescue boat."

Hong Kong chief Leung Chun-ying said the government had mobilised all its resources to respond to the accident.

A victim arrives at hospital after a collision between a ferry and another vessel in Hong Kong.

Medical personnel transfer a victim to a hospital after a private vessel collided with a ferry in Hong Kong.

"All our emergency rescue teams are concentrated there... We can see that bit by bit, the people in the water are being rescued," he told reporters at a pier as the injured were being put into ambulances.

Later, after visiting a hospital where a number of those hurt had been taken, he said: "Government divers have entered the submerged portion of the boat to rescue survivors, passengers or crew members.

"We will investigate this incident, we must understand the reason for this incident."

Survivors told how the water level inside the boat being used by HK Electric rose quickly before the vessel sank, RTHK news website reported.

Hong Kong Electric's Director of Operations S.S. Yuen confirmed the passengers were on their way to the fireworks display.

"This is a very happy holiday and it turned out to be such a tragic incident," he said.

The FSD said 28 boats, two helicopters and 20 ambulances were involved in the rescue operation.

Lamma island is the third largest island in Hong Kong, with a population of around 5,000 people. It is popular with expats, who enjoy its car-less narrow streets and laid-back lifestyle.

Police said the cause of the accident was not yet known.