By Venus Wu and Clare Jim
HONG KONG (Reuters) - China's third most powerful leader said on Monday that Beijing had the right to "step in" to Hong Kong's leadership contest, according to local politicians who met him, in remarks fuelling fears of meddling from Communist Party leaders.
The comments by Zhang Dejiang, the head of China's parliament and its leading official on Hong Kong issues, came after other officials played down rumors that Beijing was interfering in a race pitting China's preferred candidate against a more popular figure.
Under laws governing the former British colony since its return to Chinese rule in 1997, autonomous Hong Kong has the right to choose its chief executive via a 1,200-strong election committee stacked with Beijing loyalists.
The committee is due to vote at the end of this month to decide between two former officials and a retired judge to lead the freewheeling city of 7.3 million people.
But the independence of the election has been questioned, with several election committee members telling media they had received phone calls from people with ties to the Chinese government trying to influence their votes.
The head of Beijing's representative office in Hong Kong, Zhang Xiaoming, said over the weekend that allegations of intervention were only rumors.
Zhang Dejiang, chairman of the National People's Congress, said it was important for the election to proceed smoothly and stressed the significance of the chief executive's role as a link between Beijing and the Asian financial hub, according to the convener of the Hong Kong delegation to the congress, Maria Tam.
"It is a very important role, so the central government has the right to step in," Tam told reporters in her summary of Zhang's comments.
Zhang also warned the delegation during the annual parliamentary meetings in Beijing that Hong Kong should not allow politics to dominate life in the city.
He added that it was unfortunate that "street politics" had become a part of everyday life in Hong Kong while the neighboring Shenzhen city was catching up economically.
"It is quite possible that Shenzhen can overtake Hong Kong in two years," Tam cited Zhang saying.
Calls to the central government's Hong Kong and Macau Affairs Office seeking comment went unanswered. China's Foreign Ministry, the only department which regularly answers questions from foreign reporters, declined to comment.
The British government said it hoped that following the selection, discussion would resume about progressing to a "more democratic and accountable system of government".
"This would support Hong Kong’s continued prosperity and help protect the Special Administrative Region’s rights and freedoms," a British Foreign Office spokeswoman said.
Hong Kong returned to China under a "one country, two systems" formula that allows freedoms not enjoyed on the mainland. China bristles at dissent, however, especially over issues such as demands for universal suffrage.
This month's election is the first since mass pro-democracy street protests rocked Hong Kong in late 2014.
"EXTRAORDINARY AND OUTSTANDING"
Beijing's support means former Hong Kong civil service head Carrie Lam is tipped as the favorite in the contest despite losing popularity polls to an ex-colleague, former Financial Secretary John Tsang.
Tsang had previously rejected speculation that Beijing did not trust him despite his almost decade-long tenure as financial secretary.
But during the meeting Zhang stressed "many times" that the next chief executive needs to be "extraordinary, outstanding" and have Beijing's trust, said Hong Kong delegate and election committee member Michael Tien.
"The implication is that being a secretary for 10 years doesn't necessarily mean the person is qualified as a chief executive," Tien said.
Tien added some committee members expected the Beijing leadership to make its final preference known closer to the election.
The central government is legally required to officially appoint the winner of the committee's election.
Another delegate, the former head of Hong Kong's legislature, Rita Fan, denied that Beijing was intervening in the race, adding it had the right to voice its opinions.
"As a stakeholder, the central government has a right to express its views, and it hopes people can take its opinions into consideration," Fan said.
But critics say Zhang's comments just weeks before the polls would further undermine the "one country, two systems" principle, which has come under strain, especially since the shadowy detention of five Hong Kong booksellers in late 2015.
"The central government might as well just tell us directly who to vote for and we all become rubber stamps," said pro-democracy legislator and election committee member Lam Cheuk-ting.
(Reporting by Venus Wu and Clare Jim; Additional reporting by Ben Blanchard in Beijing and Kylie MacLellan in London; Editing by Nick Macfie)