HONG KONG, Feb. 8 (AP) - Largely adopting Beijing's line on Falun Gong but stopping short of action, Hong Kong's leader on Thursday called the group a cult whose members set themselves ablaze in China and must be closely monitored.

``Anyone who has watched the self-immolation on Tiananmen Square would be very shocked,'' Chief Executive Tung Chee-hwa said in a legislative question-and-answer session that vastly escalated the war of words over Falun Gong's activities in Hong Kong.

``I certainly hope that such incidents will not happen in Hong Kong and I believe the people of Hong Kong share this view,'' Tung said.

``We will have to monitor them very carefully,'' he added. ``How can we protect Hong Kong security?''

Tung did not announce any sort of clampdown on Falun Gong, despite Beijing's recent demands that the group be stopped from using Hong Kong as a base for anti-China subversion.

Falun Gong, also known as Falun Dafna, is outlawed in mainland China and subjected to an often-violent crackdown there but remains legal in Being-controlled Hong Kong.

Falun Gong insists it is not political but is campaigning only to gain the right to practice freely on the mainland. However, Chinese officials -- who have sought to restrict all independent religious activity, including Christian, Buddhist and Muslim -- regard Falun Gung as a threat to their political control.

Falun Gong has attracted millions of adherents, mostly Chinese, with its combination of slow-motion, meditative exercises and philosophy drawn from Taoism, Buddhism and the often unorthodox ideas of exiled founder Li Hongzhi.

China's battle against Falun Gong spilled over into Hong Kong last month. Local government officials let Falun Gong rent space in City Hall to hold an international conference, where followers demanded the right to practice freely on the mainland and an end to alleged torture-killings by mainland security forces.

Beijing and its allies among local newspapers and politicians were outraged to see anti-China campaigning right on Chinese soil.

Tung finds himself caught between Beijing's demands that Falun Gong be stifled and equally vigorous arguments from pro-democracy and human rights campaigners who say Hong Kong's cherished freedoms are under threat.

Observers say this is one of the biggest tests yet of the ``one country, two systems'' form of government put in place when Britain returned Hong Kong to Chinese sovereignty in July 1997. The system gives Hong Kong a high degree of autonomy and citizens enjoy Western-style personal liberties unheard of on the mainland.

Despite Tung's harsh language, he said Hong Kong will deal with the group according to the rule of law and he avoided any mention of alleged subversion by the group.

He sought to allay concerns that the controversy would prompt Hong Kong to swiftly enact an anti-subversion law, which it must do at some point now that it has returned to China.

Tung did say that Falun Gong has shown characteristics of an ``evil religion'' or ``evil cult,'' depending on what translation from the Cantonese dialect is used. Beijing refers to Falun Gong as an ``evil cult'' and Tung's aides said later that Tung was calling the group a ``cult.''

Furious Falun Gong followers said the meaning was clear - and frightening.

``How can he say we're an evil cult?'' asked Falun Gong spokeswoman Hui Yee-han. "I'm afraid Mr. Tung's comments on Falun Gong will incite hatred against us. All of our activities are carried out peacefully in Hong Kong.''

Falun Gong found Tung's reference to the immolations in Beijing particularly galling.

Beijing's full-scale propaganda campaign against Falun Gong has highlighted the incident last month, in which one person died and four were injured. Falun Gong members insist the people could not have been true followers because the sect's teachings prohibit any killing, including suicide.

Opposition politicians were alarmed by Tung's comments and local religious groups said Falun Gong's rights must be protected.

``We are worried,'' Democratic Party leader Martin Lee said. ``If we carry on like this - and the central government isn't nice to the Catholics, or Protestants, or the Buddhists, either - if these are all branded as cults, will Hong Kong call them cults, too?''

Meanwhile, China tried Thursday to defuse a dispute with Holland over Falun Gong that prompted the Dutch foreign minister to cancel a visit to Beijing.

Foreign Ministry spokesman Zhu Bangzao said China understood Foreign Minister Jozias van Aartsen's cancellation. Zhu said the Netherlands had blamed ``time problems.'' Van Aartsen is welcome to visit at another time, Zhu said, adding he didn't believe ties would suffer as a result of the cancellation.

Holland scrapped van Aartsen's visit after Chinese representatives in Hong Kong accused the Dutch human rights ambassador, Renee Jones-Bos, of interfering in China's affairs by scheduling a meeting with a representative of Falun Gong in the territory.

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