The revised proposals focus on the functional constituency elections, for which nine new seats will be created for the 1995 poll, and the composition of the committee which will appoint another 10 councillors to the 1995 legislature.

Under the revamped functional constituency poll, the British side envisages about one million voters taking part, compared with the Patten proposal that would have meant 2.7 million people casting ballots.

But sources said China's major aim was to see existing rules on who could and could not vote in functional constituencies applied to the nine new seats, and not turned into a disguised form of direct elections.

Regarding the election committee, a British source said the counter-proposal envisaged that it be composed of members from four sectors as outlined in the Basic Law - business; professionals; grass-roots; and former political figures, such as local delegates of the National People's Congress.

While this is in line with mainland thinking, the major difference lies in how committee members would be chosen, according to the source.

While China favours members being nominated through individual bodies, Britain proposes that they be elected on a ''one man, one vote'' basis from all members in the relevant bodies.

Sources close to the Chinese side said differences would also arise from British attempts to discuss issues other than the 1994/95 electoral arrangements.

They include having the 2007 legislature returned by universal suffrage; allowing the 1995 election committee to elect the chief executive of the Special Administrative Region (SAR) in 1997; and giving Britain a say in the formation of the Preparatory Committee for the SAR.

Given the wide discrepancies between the sides, the director of Xinhua (the New China News Agency), Zhou Nan, yesterday reiterated patriarch Deng Xiaoping's speech to then British prime minister Margaret (now Lady) Thatcher in 1982 to local deputies to the National People's Congress.

Mr Deng's speech, which warned of an early takeover by China if there was chaos, was carried in the left-wing Ta Kung Po yesterday.

According to the editorial, Mr Deng told Lady Thatcher: ''If there is serious chaos in Hong Kong, the Chinese Government would be forced to reconsider the date and method in resuming Hong Kong.'' An editorial in the left-wing Wen Wei Po accused Britain of erecting a barrier for the talks by introducing the new policy to allow expatriate staff on contract terms to switch to local terms before the talks.

Describing the British attitude of not consulting China on the new policy as ''non-cooperative'', the editorial said such a stance had undermined a ''smooth transition'' in Hong Kong.

In Beijing, chief Chinese negotiator Jiang Enzhu pointed out that Mr Deng's decade-old remarks remained relevant.

They had provided very important and meaningful guidance in moving towards a stable transition and smooth change-over of sovereignty, said Mr Jiang.

But his opposite number, Sir Robin McLaren, dismissed the threat as outdated by saying that it had been made well before the signing of the Joint Declaration.

Although the Chinese side has raised an objection to the change in the localisation policy, Mr Jiang declined to comment on whether this issue would affect the talks.

Sir Robin said: ''As it [the localisation policy] has nothing whatsoever to do with the substance of our talks, I don't see any reason why it should.''