A HONGKONG-BASED mainland official yesterday warned that deficit budgets planned for the transitional period would upset the financial stability of the future Special Administrative Region government. Mr Chen Keqiang, director of the economic affairs department of the local branch of the New China News Agency, said the deficit strategy this year went against the conventional fiscal policy adopted by the Hongkong Government. ''It should not violate the principles of keeping expenditure within the limits of revenues in drawing up its budget, striving to achieve a fiscal balance and avoiding deficits,'' he said. ''The Government should not drain fiscal reserves during the transition period. This reserve is the wealth of Hongkong people, generated over a long time. Britain should not overspend before 1997.'' According to Article 107 of the Basic Law, the Hongkong SAR should follow the principle of keeping expenditure within the limits of revenue in drawing up its budget and should strive to avoid deficits and keep the budget commensurate with growth of the economy. Despite China's concern over the deficit, the director of the Chinese State Council's Hongkong and Macau Affairs Office, Mr Lu Ping, said the future SAR Land Fund would reach up to $80 billion. In assuring Hongkong civil servants of their pension entitlement after 1997, Mr Lu told a visiting delegation of the Disciplined Services Consultative Council in Beijing that the Land Fund could be expected to swell to $80 billion by 1997. Mr Lu's remark, contained in a transcript of his meeting with the consultative council delegation and printed extensively in the left-wing Wen Wei Po yesterday, was made on the eve of Mr Hamish Macleod's Budget speech. But his Land Fund comment was in sharp contrast to Beijing's previous stance that the amount would be less than $80 billion. In March 1991, before the signing of the Memorandum of Understanding on the new airport projects, Mr Lu rejected former financial secretary Sir Piers Jacobs' projection that the Land Fund could snowball to $80 billion by 1997. When tackled then, Mr Lu said: ''Who said that? . . . the Financial Secretary? Thank God. Thank you very much. If [we] can get $80 billion, I should be very grateful.'' Speaking to the consultative committee members on Tuesday, Mr Lu said China had to fight hard with Britain to ensure more reserves would be left for the SAR government. ''We don't fight for the money for ourselves, we won't get a penny,'' he said. ''We fight for the [future] Hongkong government, having also taken into account your pension entitlements.'' Although Britain has promised to leave $25 billion in the kitty for the post-1997 government, Mr Lu said Beijing could not rely on that sum. ''We still have the SAR Land Fund,'' he said. ''It is expected by 1997 that the fund would have about $70 billion to $80 billion. ''The two figures together would leave [the SAR] about $100 billion. Although this doesn't mean [the SAR] would be very well-off, at least it makes it affordable to meet the pension payments.''