By Diana Chan and John Ruwitch
HONG KONG, Oct 8 (Reuters) - Pro-democracy protesters in Hong Kong agreed with the city's government late on Tuesday to start formal talks later this week to address concerns that have brought tens of thousands of people onto the city's streets.
The student-led demonstrations have calmed since clashes with police over a week ago, and the number of protesters has fallen since violent scuffles broke out at the weekend between demonstrators and pro-Beijing opponents.
On Tuesday a few hundred protesters remained camped out on the roads leading into the city's main government and business districts, blocking traffic and causing some of the city's schools to close.
The protesters have demanded that the city's Chief Executive Leung Chun-ying step down 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. Leung, appointed by China, has ignored calls to step down. ID:nL3N0R107W]
"We have confirmed that we will hold the first round of meetings on Friday at 4 p.m.," Lau Kong-wah, the government's undersecretary of constitutional and mainland affairs, said after a discussion with student representatives on Tuesday.
The talks would focus on "the basis for political development and the legal implementations of these political reforms," he said, referring to plans for the 2017 election of the Chief Executive, Hong Kong's leader.
Student leader Lester Shum confirmed that the students would take part as a way to convey their message to senior government leaders, but said he was "angry and disappointed" that the talks were expected to be limited in scope.
The protests would continue until "practical measures (have) been forged between the government and the people," he said. Any violence or attempts to clear the students would affect the talks, he said.
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 mainland China. The Communist Party leadership has dismissed the Hong Kong protests as illegal and has left the city's Beijing-appointed leader Leung to find a solution.
Protesters relaxed blockades of some key roads in the downtown area this week, home to banks, upscale shopping malls and the stock exchange.
"We know we have caused some inconvenience but we have our reasons," 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. "We hope that other people understand."
With trunk roads occupied by protesters, alternative routes into the city have quickly become clogged.
Traffic jams on Hong Kong Island and across Victoria Harbor in Kowloon stretched back miles (km) in some places. Passengers trying to get onto underground trains were packed tight on Tuesday as they queued up two levels and spilled out onto the street near the main protest site in the Admiralty district.
SALES SLUMP
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 that 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 across the harbor 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.
In one incident on Tuesday, around 40 anti-"Occupy Central" protesters emerged at the Admiralty underground station near the main demonstration site, but demonstrators heckled them until they left.
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/Robert Birsel/Susan Fenton)