By Donny Kwok and John Ruwitch
HONG KONG (Reuters) - Hong Kong's dwindling pro-democracy protesters relaxed blockades of key places on Tuesday, allowing some business supplies in and out, although traffic was still largely snarled and talks with the government offered little hope of a quick solution.
Hundreds of protesters in the second week of their campaign for greater democracy were camped out on the road leading into Hong Kong's main government and business districts, the last holdouts after days of rallies that attracted tens of thousands at their peak.
The student-led protesters began lifting their controls of government offices and retail areas on Monday as preliminary, behind-the-scenes talks meant to lead to formal negotiations showed modest signs of progress.
"Now we just have to wait and see about the meetings," said Ronald Chan, a recent university graduate who was one of several protesters manning a barricade in the Central business district, but allowing delivery vans and garbage trucks in and out.
He said several passersby had thanked them for allowing deliveries and he estimated that more than half supported them.
"We know we have caused some inconvenience but we have our reasons," he said. "We hope that other people understand."
The 'Occupy Central' protests, an idea conceived over a year ago referring to the Central business district, 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.
Beijing fears that calls for democracy in Hong Kong could spread to the mainland, with China already facing separatist unrest in far-flung Tibet and Xinjiang. The Communist Party leadership has dismissed the Hong Kong protests as illegal and has left the city's Beijing-appointed leader, Leung Chun-ying, to find a solution.
Over the past week, the protesters have demanded that Leung quit and that China allow Hong Kong people the right to vote for a leader of their choice in 2017 elections. China wants to select candidates for the election.
After preparatory discussions with student representatives late on Monday, Lau Kong-wah, the government's undersecretary of constitutional and mainland affairs, said both sides had agreed on general principles for formal talks.
"I think today's meeting was successful and progress has been made," he told reporters.
Protest leaders have promised to carry on with their Occupy Central demonstrations until their demands are met.
"It has to end when, and only when, the government promises something, otherwise it is impossible to persuade the people to quit," said Hong Kong Federation of Students leader Alex Chow.
With trunk roads occupied by protesters, alternative routes into the city have quickly become clogged.
Traffic jams on Hong Kong Island and across Victoria Harbour in Kowloon stretched back miles in some places. Passengers trying to get on to underground trains were packed tight as they queued up two levels and spilled out on to the street near the main protest site in the Admiralty district.
Retail authorities have warned that a quick solution is needed before the former British colony suffers a fall in October sales, an important shopping month that encompasses the Golden Week holiday period, for the first time since 2003.
The Hong Kong Retail Management Association said late on Monday sales at chain stores had dropped between 30 and 45 percent from Oct. 1-5 in Admiralty and Central, as well as in the nearby shopping district of Causeway Bay.
Sales fell just as sharply in Kowloon's working class district of Mong Kok, scene of some of the most violent clashes between protesters and police and pro-Beijing groups.
Many Hong Kong businesses were already struggling before the latest demonstrations, a monthly survey by HSBC and Markit Group showed on Tuesday. New business fell for the fifth straight month in September, while firms reduced staffing levels for the sixth consecutive month. The rate of job shedding was the quickest in four months.
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 Sept. 28, when they fired tear gas and pepper spray at protesters.
The protests have helped wipe close to $50 billion off the value of shares on the Hong Kong stock exchange. The World Bank has said the protests were hurting Hong Kong's economy, although the impact on China was limited.
(Additional reporting by Farah Master, Clare Baldwin, Twinnie Siu, James Pomfret, Clare Jim, Joseph Campbell, Yimou Lee, Diana Chan, Kinling Lo and Venus Wu; Writing by Paul Tait; Editing by Nick Macfie and Robert Birsel)