THE United States and Britain are said to have put pressure on the Hong Kong government not to ban the Falun Gong movement in the territory.
Sources told BT the two governments have signalled to the Tung Chee-hwa administration 'in the strongest terms' that any ban on Falun Gong would effectively spell the death of the 'One Country, Two Systems', as Hong Kong would then be just another Chinese city.
Diplomatic pressures are said to have built up after Mr Tung declared last week that Falun Gong was 'an evil cult'.
The US and Britain are also said to be considering retaliatory measures. In the case of the US, this could include a reassessment of trade links with mainland China.
The British government is also said to have issued through informal channels a stern warning that it would initiate measures that will severely hurt Hong Kong's international image and signal a political fallout between Hong Kong and its former colonial master.
But some of America's allies - particularly in Europe - are not too keen on supporting these measures.
The Falun Gong movement, banned in the mainland, has been a political minefield which has plagued the Tung administration for months as the international community watched the principle of One Country, Two Systems being put to its greatest test to date.
Not since the controversial right of abode case, where Beijing was asked to interpret certain provisions of the Basic Law, has the territory been faced with a bigger threat to the survival of the 'Great Concept' laid down by the late paramount leader Deng Xiao-ping.
Faced with conflicting demands from different factions, Mr Tung is in an almost no-win situation as he attempts to balance perceived demands from his Beijing political masters and his Hong Kong constituents as well as international opinion.
In February, he said Falun Gong was 'more or less' a cult. Last month, he described them as 'a bit of a cult'. In his remarks to lawmakers last week, he cut out all ambiguity and declared the group an 'evil cult'.
But for now, the Hong Kong leader is unlikely to take the step of outlawing the group which practises deep-breathing exercises most of the time, although members do take part in public demonstrations to protest against persecutions of their members in the mainland.
Observers feel an outright ban would have too high a political cost on Mr Tung.
'Pressure is not just coming from the north but also from across the Pacific,' said one political watcher here. 'With China at the doorstep of WTO and when passage of NTR (normal trading relations) is hanging in the balance, I believe our masters will take a more moderate stand, for the time being at least.'
Any decision by Mr Tung may also have a huge impact on the jittery relations between China and the new US administration, fresh from the recent ugly spy plane incident.
Despite his statement last week, Mr Tung has also indicated he will not be enacting anti-cult laws soon. In fact, the Hong Kong government is not expected to carry out any concrete measures other than uttering the usual rhetoric to pacify its Beijing masters.
One observer said: 'Most Hongkongers do appreciate that we are living under the shadow of China and would not quibble with any measures justified by concrete evidence that the religious movement is indeed aiming to destabilise Hong Kong. Perhaps everyone is holding their breath for Falun Gong to step out of line.'
Until that happens, Mr Tung has little room to manoeuvre. He has already suffered a huge political setback over the issue.
In the past week, the chief executive has come under sharp criticism from not just the liberals for his hardline statements on the movement but also from pro-Beijing figures who claimed he has been too indecisive for too long.
It has also been reported that Beijing has not been too happy with Mr Tung's handling of the issue, although the Chinese leaders, including President Jiang Zemin, have opted not to comment openly on the issue in Hong Kong.
Some analysts cite the high-profile activities of Falun Gong as one of the main factors that led to the departure of former chief secretary Anson Chan who was popularly seen as the defender of democracy in Hong Kong.