The proposed legislation would have allowed fugitives to be handed over to Beijing, fueling concerns that Hong Kong's legal system may be compromised by closer judicial ties with China.
Despite the suspension, protesters turned up in force demanding the resignation of the city's Chief Executive Carrie Lam.
"This is a victory for the protesters, without question," said Duncan Innes-Ker, Asia regional director at the Economist Intelligence Unit, after the proposal was put on hold indefinitely — though not completely scrapped.
"However, in broader terms, the (Chinese) central government is unlikely to back off from its ongoing efforts to tighten political controls over Hong Kong," Innes-Ker added.
He questioned Lam's future as the leader of the territory, and criticized her "poorly judged statements during the demonstrations" that "only served to inflame public anger."
While Lam issued an apology through a government spokesperson on Sunday, organizers of the mass protests called said it was impersonal and a "total insult" to protesters.
China has been on record as agreeing with the need for the legislation, but after Lam's decision to suspend it, the central government on Saturday expressed its support, respect and understanding and said it "will continue its staunch support for Chief Executive Carrie Lam."
"Anything regarding Hong Kong ... is a domestic affair," said Chinese foreign affairs spokesperson Lu Kang on Monday during a regular press conference. He said in Chinese that it was "not an issue to be responded by the foreign affairs ministry," according to a CNBC translation.
In addition to that, Lu added that "the Chinese central government is very confident in Carrie Lam's work, and the Chinese central government will continue to firmly support the chief executive as well as the special administrative region's government policy."
"Beijing will not want to send a message that political leaders can be pushed from office by people power," the EIU's Innes-Ker said, adding that he believes that Lam will see out the rest of her current term.
The protests have highlighted the weaknesses in Hong Kong's political system," Innes-Kerr wrote in the report.
"Accountable to both Beijing and the people of Hong Kong, chief executives have prioritized the need to keep the central government happy, but this has stoked political instability in the territory. In the long term, that dynamic is likely to continue unless there is political liberalization on the mainland," he added.
On the other hand, Steve Tsang, a London-based political scientist told Reuters that Lam had caused Chinese President Xi Jinping "major embarrassment" ahead of a possible meeting with U.S. president Donald Trump at G-20 summit in late June.
"I think Carrie Lam's days are numbered ... Beijing cannot afford to sack her right away because that would be an indication of weakness. They would have to allow for a bit of decent interlude," said Tsang.
Some analysts have said the public outcry and demonstrations could affect the social cohesion in Hong Kong.
"Beyond the bill itself, it remains to be seen whether social divisions within Hong Kong will intensify, or if a greater consensus about its relationship with mainland China will emerge," Mingda Qiu, research associate at the Center for Strategic and International Studies wrote in a note on Friday.
Beijing could "continue its current approach of gradual expansion of its influence in Hong Kong," said Qiu. Alternatively, China might reconsider its approach and "do more to provide reassurance to Hong Kong residents and the international community," he added.
Other China watchers appeared to be a little more optimistic with Hong Kong's pursuit of democracy.
Gideon Rachman, chief foreign affairs commentator for the Financial Times even suggested that Hong Kong "is acting as a guardian of China's memory and of the hope that a more liberal China could one day replace the current one-party state."
— Reuters contributed to this report.