China, South Korea, Japan and Russia are also involved in the negotiations at the Diaoyutai State Guesthouse aimed at persuading Pyongyang to back down from its nuclear ambitions in exchange for energy and food aid.

The working-group meetings -- the second round at this level -- are scheduled to run until Tuesday and will work on "preparations for substantial contents to be discussed" in the full blown talks starting Wednesday.

The Xinhua news agency, citing foreign ministry spokeswoman Zhang Qiyue, said "relevant documents and arrangements" were being finalised, without specifying what documents she was referring to.

Delegates have sent mixed messages on the prospects of the talks since their arrival in the Chinese capital over the weekend, with Japan predicting "many difficulties," while Russia has voiced limited optimism.

China has called for only a "reasonable expectation" for the third round vice-ministerial level talks, noting that as the negotiations deepened, differences and difficulties increased.

"Only by peaceful dialogue can the Korean peninsula be a peaceful and stable peninsula. It is beneficial for all parties involved," Chinese Foreign Minister Li Zhaoxing stressed Monday.

"We hope and believe that all parties involved will work hard for that goal."

According to South Korean media, Seoul will offer to provide energy and other economic aid to the North if it yields to the American demand for a "complete, verifiable and irreversible dismantlement" of its nuclear programs, both plutonium and enriched uranium.

South Korean envoys presented the idea at a joint strategy session with the United States and Japan on Sunday, the Yonhap news agency said.

A similar plan was proposed during the last round of talks in February and North Korea was not interested, claiming it does not have a uranium enrichment program.

Pyongyang has also insisted that it be allowed to maintain a nuclear program for peaceful purposes.

Japanese reports Sunday said that Tokyo, together with South Korea and the United States, would also propose that Pyongyang's nuclear facilities be inspected by the International Atomic Energy Agency.

Analysts have said this is a possibility if aid in the form of fuel oil is offered in return.

Japanese Prime Minister Junichiro Koizumi urged North Korea to take a "realistic step" toward ending the 20-month impasse.

"It will be what I regard as a tangible result if North Korea abolishes its nuclear (arms) program and takes a realistic step," Koizumi said Sunday, according to Japanese media.

"Each participating country will work toward achieving this."

The impasse blew up in October 2002 when Washington said the Stalinist state had broken a 1994 nuclear freeze by launching a secret nuclear weapons program.

While Pyongyang denies it is running a uranium scheme, it has offered to freeze its plutonium facilities in return for simultaneous rewards from the United States.

WAR.WIRE