PROMINENT American scholar Professor Jerome Cohen has called for ''constructive engagement'' from the West when dealing with China so as to bring about systematic changes and better protection of human rights. Speaking at the City Polytechnic in Hong Kong last night, the legal guru made clear that these changes could only happen through domestic channels and not because of foreign pressure. Foreign governments and institutions, he said, could help promote human rights in China by cultivating more dialogue with their Chinese counterparts. He said foreign law firms could help through lectures and training, and suggested the establishment of a joint graduate law school. ''If you really want to help the legal system develop in China . . . if you want to promote human rights in China, I think it's desirable for more people to co-operate with China and promote economic development,'' he said. ''I believe in positive co-operation, not in negative sanctions,'' he added. Professor Cohen, a board member of the human rights watchdog Asia Watch and an adviser to the Sichuan Government, warned that revoking China's Most Favoured Nation status would result in the unemployment of millions of workers and trigger a backlash in economic reform. Great changes had occurred in China, he said, and the communist leadership would soon have to respond to such changes by reforming the legal and political systems. He believed there would be increasing sensitivity to human rights demands and demands of the legal system. The forces that were turning China towards a market economy and a legal system with concern for law and human rights were working to make China's leadership more sensitive to the need for such changes; and increasingly aware of the importance of meeting certain minimum standards in the legal system. However, such changes might not be considered as desirable under today's leadership because China was faced with a crisis over who would succeed leader Deng Xiaoping. ''It's very unlikely that the situation will be right for greater relaxation and more legalisation of the process until the new leadership is discussed,'' Professor Cohen said. On the expulsion of exiled labour unionist Han Dongfang, Professor Cohen said the Chinese Government should work out conditions so that the activist would be allowed home, rather than pay a ''terrible price'' for bad publicity. Those who disagreed with current policies in China were usually less effective outside than they were inside China, he said, but in the case of Mr Han, who is in Hong Kong, he had found a way of constantly publicising the cause of freedom of travel. China would not ''lose face'' by allowing Mr Han to return home, he said, pointing out that Beijing was expert in handling ''embarrassing'' problems.