AMERICAN Consul-General Richard Mueller yesterday urged Hong Kong people to speak out on what they want for the future, but warned them to avoid confrontation with China. ''Hong Kong people cannot be afraid to speak out . . . this is not the time for Hong Kong to lose its nerve or to silence itself,'' he said. Speaking at the American Chamber of Commerce luncheon, his first public speech since he took up the post in June, Mr Mueller said Hong Kong and China should work together. ''[Hong Kong] cannot expect to thrive in a state of confrontation with Beijing,'' he said. ''Hong Kong's future is increasingly tied to China and if you have a confrontational attitude, it seems to me that it is more difficult to work those problems out.'' Mr Mueller maintained this did not necessarily require Hong Kong people to sit passively as decisions were made elsewhere on their future. They should not be afraid to speak out because this was an important part of the transition towards 1997, he said. ''I sincerely believe that over the long run the healthiest and most stable societies are those which encourage discussion which is civil, reasoned, and without rancour, benefiting the importance of the issues,'' he said. Mr Mueller said the Governor Chris Patten's political blueprint was constructive in stimulating discussion and debate. But he refused to be drawn on whether the United States supported the reform proposals, only saying he was optimistic that the present deadlock on the 1995 Legislative Council election talks would be resolved soon. ''We like to see those negotiations continue but the rhythm and tactics, that's up to both Britain and China. We don't presume to tell them what to do in negotiation,'' he said. He said the territory's people ''have to create and nurture organisations and institutions which can maintain Hong Kong's unique identity, which take full advantage of the high degree of autonomy promised by China, including freedom of speech and freedom of the press''. Mr Mueller acknowledged there were differences between China and the US in areas such as human rights and democracy. But he maintained both had similar goals and objectives on issues such as trade and arms control and proliferation. ''I don't underestimate the potential for misunderstanding between us, nor do I downplay the seriousness of some of the issues confronting us. ''But I'm confident that the leadership of China also understands the critical importance of the relationship and will work with us. ''My message is good Sino-US relationships are important and I think problems can be addressed and solved.'' Mr Mueller indicated that whether Beijing won the right to host the 2000 Olympics would not have any impact on relations. The United States believed the International Olympic Committee would make the decision based on its own judgment and that it was a passing issue, not a political one.