BEIJING Hongkong Development Co's decision not to take a stake in New China Hongkong Group, the newly formed investment house, will ease fears that China's politicians plan to abuse their positions by playing the territory's stock market in the run-up to 1997. The decision, made public yesterday, follows Hongkong and Macau Affairs Office director Lu Ping's denial of allegations by, among others, Hongkong legislator Martin Lee Chu-ming that mainland officials had been cashing in on stock market fluctuations by using inside information during the Sino-British row over Governor Chris Patten's proposed political reforms. It is the apparently close ties between the Beijing Hongkong Development Co and the Hongkong and Macau Affairs Office that have given rise to concern. Mr Lu's denial, quoted by some Hongkong affairs advisers who met him in Beijing, was a direct response to rumours in Hongkong that some officials had unfairly profited by buying shares. Mr Lu stressed that the Hongkong and Macau Affairs Office and the company were entirely separate. He clearly wanted to quell fears that his office would use Beijing Hongkong Development, through New China Hongkong Group, to do business in Hongkong. The high-profile investment house was set up in February to capitalise on the enormous economic potential of Hongkong and China. Even though Beijing Hongkong Development intended to take only a 2.5 per cent stake in New China Hongkong, there were worries that the political clout of the former would give the investment house an unfair advantage in deals involving China. Critics feared that, in the worst case, New China Hongkong might be able to use sensitive information to play the stock market. Mr Lu's words are therefore good to hear. The concrete action by Beijing Hongkong Development in disconnecting itself from New China Hongkong should also be well received. It at least shows that Beijing officials were willing to listen to public opinion in Hongkong. However, Mr Lu's denial that Hongkong and Macau Affairs Office officials have been involved in inappropriate commercial activity fails to reassure completely. Some involved in the founding of New China Hongkong are known to have stressed to potential shareholders in its early days that Beijing Hongkong Development was the affiliate of the high-powered political body. And it is an an indisputable fact that some key personnel in Beijing Hongkong Development have been former officials of the Hongkong and Macau Affairs Office. Indeed, the company's founder, Mr Yu Dapeng, is a former deputy department head at the office. Mr Lu himself used such ambiguous terms as ''small linkage'' to describe the relationship between the two entities. Beijing Hongkong Development's retreat from involvement with New China Hongkong should certainly help to dispel controversy. But it is even more important that, in the future, mainland officials should do their best to eschew mixing their commercial and political involvements with Hongkong.