Hong Kong Rattled as China and Britain Mix Signals BYSheila Tefft, Staff writer of The Christian Science Monitor

AMID confusing signals from Britain and China, Hong Kong is anxiously watching the debate over its future approaching a crucial crossroads.

In the last two weeks, the two countries at odds over democratic reforms proposed by Hong Kong governor Chris Patten in the run-up to Chinese rule in 1997, have hinted that they may not be so stubborn after all.

London confirmed diplomatic exchanges between Sir Robin McLaren, the British ambassador in Beijing, and China's Hong Kong and Macao Affairs Office to explore the possibility of reopening talks on political reforms in the colony.

And China backed off from its bitter tirade against Mr. Patten, underway since the governor proposed the political changes last October. No formal negotiations between the two sides have been held in four months.

But this week Lu Ping, China's director of Hong Kong policy, ruled out any resumption of discussions in the near future, suggesting, some analysts say, a division among Chinese leaders over the next step.

The developments have made Hong Kong even more jumpy than before. The stock market, the colony's most sensitive barometer of the political mood, has soared and then slumped in recent months on raised and fallen hopes for a settlement.

Supporters of the democratic blueprint, who count a slim majority of Hong Kong's 5.9 million people among their ranks, worry that Britain could sidetrack Patten, former head of the Conservative Party, and cut a private deal with Beijing, not unlike what they have done in the past.

Analysts say Patten has thrown Hong Kong into uncertainty. But for London to back down now would create political chaos in the colony and, in effect, give Beijing the opportunity to accelerate its takeover.

"If Patten is forced to back down, it would be very bad for Hong Kong," says Yves Nalet, editor of China News Analysis, a Hong Kong-based newsletter. "If he backs down, you won't be able to rule Hong Kong for the next five years."

The Patten plan would give the colony a greater measure of representative government by changing the current system of filling the Legislative Council through appointment or election by small interest groups. In the past, the British tolerated no democracy in Hong Kong, which was under the control of the governor and the civil service.

Currently, less than one-third of the council's 60 seats are filled by direct vote. The British politician says his plan would raise that to 65 percent of the legislators chosen either directly or by more representative voting blocs.

Contending that Britain is violating the agreement for the colony's turnover, China fears that greater democracy will make the colony less manageable in 1997 and risks a spillover into the Communist-controlled mainland.

Singling out Patten for an acrimonious barrage, China's aging Communists also worry that a political victory will give the Hong Kong official more leverage in negotiating the territory's deadlocked airport project and other issues.

Beijing prefers to see a new airport built in its special economic zone in Shenzhen or elsewhere in fast-growing southern China.

China has denied that it intends to establish a shadow government in Hong Kong if Patten wins legislative approval for the political changes. The Executive Council, which advises the governor, has delivered the proposed legislation to Beijing to examine and has delayed official publication of the bill this month in hopes of prodding China into a compromise. Debate is expected to take weeks as the Hong Kong legislature tries to act as a go-between.

But if the plan goes through, analysts say Patten will have difficulty in making progress on the new airport or other infrastructure projects.

Already, Beijing exerts considerable influence as the colony's largest investor with $13.9 billion in assets and as an ally of powerful Hong Kong business groups.

For many in Hong Kong, the dispute may be sapping economic confidence. But more than half of its residents are refugees from the Communist mainland, and they say Britain has to stand firm.

"It will be bad if Hong Kong has to return to China totally under Beijing's terms," says insurance broker Robert Wong.