By John Ruwitch and Clare Baldwin HONG KONG (Reuters) - Pro-democracy demonstrations in Hong Kong rolled into early Tuesday with hundreds of students remaining camped out in the heart of the city after more than a week of rallies and behind-the-scenes talks showing modest signs of progress. Student-led protesters early on Monday lifted a blockade of government offices that had been the focal point of their action, initially drawing tens of thousands onto the streets. Civil servants were allowed to pass through the protesters' barricades unimpeded. Several streets through downtown Hong Kong, which houses offices for international banks, luxury malls and the main stock exchange, remained barricaded and vehicle-free, although pedestrians could walk freely through the area. Over the past week, tens of thousands of protesters have demanded that the city's Beijing-appointed leader Leung Chun-ying quit and that China allow Hong Kong people the right to vote for a leader of their choice in 2017 elections. The stalemate appeared late on Monday to be nearing a potential turning point, however, when a senior official said formal talks to address the protesters' demands and end the demonstrations may begin later in the week. After preparatory discussions with student representatives on Monday night, Lau Kong-wah, the Hong Kong government's Undersecretary of Constitutional and Mainland Affairs, said both sides had agreed on general principles for the formal talks. "I think today's meeting was successful and progress has been made," he told reporters. "We both hope to hold these discussions soon as possible and we hope that we will be able to begin them within this week." The 'Occupy Central' protests, an idea conceived over a year ago, have presented Beijing with one of its biggest political challenges since it crushed pro-democracy demonstrations in and around Tiananmen Square in the Chinese capital in 1989. Facing separatist unrest in far-flung Tibet and Xinjiang, Beijing fears that calls for democracy in Hong Kong could spread to the mainland. The Communist Party leadership has dismissed the Hong Kong protests as illegal but has left Leung's government to find a solution. HARD TO QUIT Protest leaders have promised to carry on with the "Occupy" demonstrations until their demands are met. "Unless (we) gain significant achievement then there is no way to quit. It has to end when, and only when, the government promises something, otherwise it is impossible to persuade the people to quit," said Alex Chow, leader of the Hong Kong Federation of Students. "The pressure generated here will also be delivered to Beijing because China still has to rule Hong Kong and they have to stabilise Hong Kong. How the Hong Kong government responds to the citizens will affect stability. If they handle it in a very adverse way then it will also affect mainland China." The protests have ebbed and flowed over the past week, with people leaving the streets overnight to return later. Police have taken a hands-off approach since last Sunday when they fired tear gas and pepper spray at protesters, creating a public relations mess and provoking more people to join the unrest. "I hope students can persist. If we retreat now we will lose the power to negotiate," said Chow Ching-lam, who was studying on the ground at the main protest site. Fearing a crackdown after city leaders called for the streets to be cleared so businesses, schools and the civil service could resume on Monday, protesters who have paralysed parts of the former British colony with mass sit-ins pulled back from outside Leung's office. Some banks that had closed branches during the unrest of the past week opened for business on Monday. DISCREPANCIES ON TALKS A first meeting to pave the way for formal talks between government officials and student representatives was held on Sunday and another was expected on Tuesday, students said. "Whether we will get results from our discussions depends on the sincerity of the government and their attitude towards the occupying protesters," Lester Shum, vice secretary of the Hong Kong Federation of Students, told a news conference late on Monday. Shum said he hoped the formal talks could start before Sunday. Across Victoria Harbour in the gritty Mong Kok neighbourhood, some protesters also pulled back from where scuffles had broken out at the weekend with supporters of the government, prompting police to use pepper spray and batons again. The protests have disrupted businesses and helped wipe close to $50 billion off the value of shares on the Hong Kong stock exchange. The World Bank said the protests were hurting Hong Kong's economy, but the impact on China was limited at this point. "What we anticipate is obviously a greater impact on the Hong Kong SAR (Special Administrative Region), so slower growth in 2014 than was being anticipated earlier," World Bank East Asia and Pacific Chief Economist Sudhir Shetty said on Monday. "But at this stage our best estimates ... are that there isn't as yet significant spillover to the broader Chinese economy," he told a media briefing on the latest East Asia Pacific Economic Update. (Additional reporting by Clare Jim, Twinnie Siu, James Pomfret, Clare Baldwin, Joseph Campbell, Yimou Lee, Diana Chan, Kinling Lo and Venus Wu; Writing by Paul Tait and Jeremy Laurence; Editing by Mark Heinrich)
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