CHINA'S top official on Hongkong affairs, Mr Lu Ping, said yesterday the so-called ''second stove'', the feared second powerbase for the territory, would go ahead despite the Sino-British talks in Beijing. Mr Lu, director of the Hongkong and Macau Affairs Office, also hinted at developments next month concerning the working group on the Special Administrative Region Preparatory Committee, according to local National People's Congress (NPC) deputy Ms Liu Yiu-chu. Speaking after meeting Mr Lu in Macau yesterday, Ms Liu quoted him as saying the continuing Sino-British talks would not affect Beijing's plan to set up the alternative ''second stove'' working group. China would continue to make ''preparations on both fronts'' in case there was no co-operation from the British, she said. Ms Liu said details of the working group were likely to be finalised by the NPC Standing Committee next month, and Mr Lu hinted he would meet Hongkong representatives to discuss this after the NPC meeting. The meeting was expected to include Hongkong affairs advisers, local NPC deputies, and Chinese People's Political Consultative Conference members, she said. But speaking later, Mr Lu refused to confirm the meeting, saying it would be up to the NPC Standing Committee to decide. Ms Liu also suggested the working group, to be based in Beijing, should set up a secretariat in Shenzhen. She quoted Mr Lu as saying the proposal could be considered. The Hongkong and Macau Affairs Office chief also told reporters yesterday there could be no new talks on the airport until London put forward a fresh funding package for the project. ''It depends on whether Britain comes up with any new proposals and whether they are willing to go back to the MoU,'' Mr Lu said, in a reference to the Sino-British Memorandum of Understanding on the issue. ''It depends on what proposal it is. It's not that we can talk on any proposal . . . if everyone works according to the MoU there's no problem.'' Meanwhile, in Hongkong yesterday, New China News Agency deputy director Mr Zhang Junsheng denied reports Beijing was ready to make concessions during this week's third round of Sino-British talks on electoral arrangements. ''This is all fake. I do not know where the news come from, but we have not received such news,'' he said. A Reuter report had earlier quoted Chinese sources as saying there was room for compromise over arrangements for the 1995 polls. It said Beijing could tolerate an increase in the size of the functional constituency electorate, as long as this did not amount to de facto direct elections, as well as the inclusion of district board members on the 10-seat Election Committee. But it quoted Chinese sources as saying agreement was unlikely until after US President Mr Bill Clinton revealed his policy on China's Most Favoured Nation (MFN) trading status next month - Beijing's first apparent linkage of the two issues. Speaking before Mr Zhang's denial, Foreign Office officials welcomed the report but stressed the two were unrelated. ''We are naturally encouraged by the Chinese comments, but we see the issue of MFN status as being completely separate from that of the talks,'' a spokeswoman said. Mr Zhang also responded to former British prime minister Lady Thatcher's remark that the territory was in many ways an international issue. ''Internationalisation and being an international city are two different matters. ''The prosperity and stability of Hongkong will surely be damaged if somebody tries to pull international political powers into Hongkong. The Chinese Government will never let any foreign power influence the internal affairs of Hongkong.''