THE Hong Kong Progressive Alliance and the Liberal Democratic Federation will merge next month to form a new political coalition in the pro-China camp. The new party, which will call itself the Hong Kong Progressive Alliance, will become the third-largest grouping in the provisional legislature. With nine members in all, the alliance is smaller than the Democratic Alliance for the Betterment of Hong Kong (DAB) and the Liberal Party, each with 10 members. The party, made up of businessmen and professionals, will be headed by existing alliance chairman Ambrose Lau Hon-chuen, with the foundation's Hu Fa-kuang as honorary president. Provisional legislature members Maria Tam Wai-chu and Charles Yeung Chun-kam, together with businessmen Carson Wen and Luk Tak-kuen, will be vice-chairmen. Both sides denied yesterday that the merger was pushed by Xinhua (the New China News Agency) and stressed that they had yet to inform the de facto Chinese embassy. The alliance was seen as a business group nurtured by Xinhua when it was formed three years ago. Wong Siu-yee of the foundation said the two groups had been discussing the merger for about a year. 'We think this is a good thing because we are very close on political ideas and principles. 'The merger will be good for the upcoming election in 1998 since we can have more candidates and financial resources in the campaign,' he said. Democratic Party vice-chairman Dr Anthony Cheung Bing-leung said the new party would pose little threat. 'As far as we are concerned, our main rival in direct elections is still the DAB,' he said, citing the previous defeat of both parties' candidates.