China announced yesterday that blind dissident Chen Guangcheng could apply to study abroad, suggesting an end may be near for a diplomatic crisis that has soured relations between Beijing and Washington.

But some sounded a note of caution over expectations of any quick way out for Mr Chen, who is being kept in a Beijing hospital, saying China's leaders are worried that appearing to be soft could embolden other challengers to Communist Party rule ahead of a power handover late this year.

The announcement by the Chinese Foreign Ministry followed a dramatic and very public appeal by Mr Chen, who spoke by phone to a United States congressional hearing on his case, asking to be allowed to spend time in the US after fleeing 19 months of extra-judicial captivity in his home village.

"Chen Guangcheng is currently being treated in hospital," ministry spokesman Liu Weimin said in a brief statement.

"If he wants to study abroad, he can apply through normal channels to the relevant departments in accordance with the law, just like any other Chinese citizen."

The crisis erupted last week when Mr Chen, who campaigned against forced abortions under China's "one-child" policy, sought refuge in the US embassy.

He stayed there for six days until Wednesday, when US officials took him to a Beijing hospital after assurances from the Chinese Government that he and his family would receive better treatment.

But, within hours, Mr Chen, 40, had changed his mind, scuppering what had seemed to be a delicately constructed deal between Chinese and US diplomats to allow him to receive treatment for a broken foot and be reunited with his wife and two children.

He remains anxious about his future and the fate of family members who apparently helped his escape and were detained by authorities in the rural eastern province of Shandong.

Shortly before the ministry announcement, Mr Chen said: "My situation here is not very good. I've just found out that when friends have come to visit me they've been beaten up.

"As well, for two days I haven't been able to meet US embassy diplomats. They came here, but they weren't allowed inside to meet me. I think this situation is very bad."

The issue has cast a shadow over this week's visit to Beijing by US Secretary of State Hillary Clinton for talks intended to improve ties between the world's two biggest economies.

Putting on a brave face, she told Chinese President Hu Jintao on Friday ties were the strongest they had ever been. But Beijing has publicly accused the US of meddling in its affairs.

Chinese human rights lawyer Tang Jitian cautioned that the authorities could easily hold up the paperwork to delay Mr Chen leaving the country. China's security forces might not be as keen as its diplomats for a quick exit.

"This notice from the Ministry of Foreign Affairs is positive news, but how it will play out, we don't know. For instance, getting the approval for the paperwork to go, there are many potential pitfalls," said Mr Tang. "We can't be 100% optimistic."

One of China's main official newspapers accused Mr Chen of being a pawn in American subversion of Communist Party power, describing US ambassador Gary Locke as a backpack-wearing, Starbucks-sipping troublemaker.

"Chen Guangcheng has become a tool and a pawn for American politicians to blacken China," the Beijing Daily said.

Mr Chen, in translated comments, told the congressional hearing that villagers who had helped him were "receiving retribution".