They told her this was neither an election to fill a Legco vacancy left by long-time Beijing loyalist Ma Lik, nor a battle between the pro-democracy and Beijing-friendly camps. Instead, they framed it as a 'war for the referendum' on universal suffrage in 2012.

Mrs Chan and her allies know this is a golden opportunity to use the by-election as a platform to fight for universal suffrage in 2012 and to intensify the green paper discussion on political reform.

A source close to Mrs Chan said: 'She did not ask for it [the election], the situation just arrived and happened.

'This is obviously the right time to do so. When someone is talking about the 'D' word for so long, one has to gain some legitimacy and a mandate for saying it.

'And she can also demonstrate to others in the city that one can fight for democracy in a sensible, rational and graceful manner that can be accepted by authorities on the mainland,' the source said. A prominent democrat added that Mrs Chan's participation would give the democracy movement renewed impetus.

Although the former chief secretary enjoyed expressing her views as leader of her Core Group, which was set up last year to map out a strategy for taking the debate on constitutional reform forward, her influence and popularity had, in fact, gradually declined since she decided not to run in this year's chief executive election. Had she decided not to run this time, Mrs Chan would have faded from the political scene.

Another key democrat said: 'This is her last chance to win all or lose all.'

A source close to Beijing said the Hong Kong and Macau Affairs Office's main concern was not whether Mrs Chan would win December's by-election, but how her campaign would affect the district council polls on November 18.

Mainland officials worry that Mrs Chan's campaign will draw more votes to the pan-democratic camp and thus help it win more district seats. They also worry that the task of reaching a consensus on constitutional reform - hopefully one of universal suffrage in 2017 or beyond - would be more difficult.

The possible presence of a former top official in Legco could maintain the debate for democracy's momentum and bring the quality of the policy discussion inside the chamber to another level. This would, of course, pose a great challenge to Chief Executive Donald Tsang Yam-kuen and his government.

Analysts say that whether Mrs Chan runs for re-election for another four years next year or not, she has already become the natural leader of the pan-democracy camp: someone who can mediate between factions for the Legco election campaign and lure new talent to join the election and become the real pan-democrat fighters for 2012 and beyond.

WIl she or won't she?

Milestones in Anson Chan's political career

Sep 1962: among first batch of female administrative officers recruited

Mar 1987: named secretary for economic services, becoming first Chinese woman appointed as policy secretary

Nov 1993: becomes first Chinese chief secretary and head of colonial civil service; later dubbed 'Hong Kong's conscience' by Newsweek magazine

1999: accepts former chief executive Tung Chee-hwa's invitation to continue to serve beyond the age of 60, until June 2002

Jan 2001: announces decision to resign, and leaves in April amid speculation about discord with Mr Tung

Dec 2005: surprises participants by taking part in march against Chief Executive Donald Tsang Yam-kuen's electoral reform package

June 2006: makes appeals with pan-democrats for public to take part in July 1 pro-democracy march, fuelling speculation over her political ambitions

July 2006: discloses intention to form core group to push for universal suffrage

Sep 2006: says she has no plan to contest the 2007 chief executive election

Sep 2007: Democrats say Mrs Chan being lobbied to run against Regina Ip Lau Suk-yee in Hong Kong Island by election, although she says she is not interested

Friday: consults her core group and says she will soon make an announcement on whether to run