CHINA may allow the panel that will choose 10 legislators in 1995 to comprise mainly indirectly elected members - but only if Britain agrees that the 400-strong body be made up of four sectors of the community, in accordance with the Basic Law. According to informed sources, Beijing will agree to having more elected elements in the body provided London accepts the formula in the Basic Law, which calls for the electoral committee to be made up of people from the four sectors. These are businessmen; professionals; labour representatives and grassroots people; and former political figures, such as local deputies to the National People's Congress. A mainland source said: ''You have to reach that point [of an agreement on the composition], before there can be any discussion on the selection methods. We have not reached that point yet.'' The source said China would reject any selection method for the committee seen as amounting to direct elections. He said China had ''expressed some of its thoughts'' on the electoral arrangements to Britain in the past two rounds of talks. ''The differences between the two sides are still wide,'' he said. The source conceded that it was technically difficult to have a fully-elected committee. This was because it would be difficult to have elections in the sector which comprised ''former political figures'', such as retired Executive Councillors. ''Selection through democratic consultation might be the only alternative to choose representatives to sit on the election committee,'' he said. Sources said China did not want to see major changes to the functional constituency elections. Although Beijing has no specific idea of the size of the functional constituency franchise, it is firmly against the proposal made by Governor Chris Patten, which widens the size of eligible voters in functional group polls to more than 2.7 million. ''It isn't the case of the Chinese side setting an upper limit for the number of people qualified to vote in functional constituency polls, say, 300,000. It depends on how the negotiation goes,'' the source said. It is understood that Beijing agreed that at least one of the nine additional functional seats should go to the labour sector and the other to the Hongkong Chinese Enterprises Association. But the source said Chinese negotiators had not indicated specifically how the nine seats should go in previous rounds of talks. The source said the two sides would move closer towards the nuts and bolts of the three major issues of the ongoing talks in the eighth round, scheduled to be held next Tuesday. The source said deliberations on a set of criteria, under which legislators elected in 1995 would qualify to ride on the through train after 1997, would be the most contentious issue. Director of the State Council's Hongkong and Macau Affairs Office Lu Ping said in Beijing last week that a set of ''subjective criteria'' was needed to define whether members ''uphold the Basic Law'' as required under the post-1997 constitution. Under the Basic Law, members of the 1995 legislature, meeting other requirements, such as ''the upholding of the Basic Law'', can serve beyond 1997 upon confirmation by the Special Administrative Region Preparatory Committee, which will be set up in 1996.