Beijing and Washington are working on a deal to allow rights activist Chen Guangcheng to leave China for the United States with his family after he fled house arrest, a fellow activist said Tuesday.

Bob Fu, who runs the US-based group China Aid and has been in contact with Chen and his supporters, said both sides were keen for a swift agreement ahead of key US-China talks that start on Thursday in Beijing.

Chen had initially been reluctant to leave China, but now accepted it would be difficult for him to stay, and was prepared to go into exile in the United States as long as his family could accompany him, Fu said.

"The situation has changed on the past few days. He understands that there is no way he could return to Dongshigu now," Fu told AFP by telephone, referring to Chen's hometown.

"But he won't leave without his family -- if he had thought about that he would already have gone.

"The most viable scenario is to negotiate a quick deal to allow China to make a face-saving agreement."

That could involve China allowing the family to leave for medical treatment in the United States, said Fu, a former Tiananmen Square democracy activist who fled China in 1996 and now lives in Texas.

Fu did not reveal who his sources were, but said he had contacts with officials in China and Washington who said both sides were "working very actively to find a solution".

Chen, 40, a self-taught lawyer, escaped from house arrest in the eastern province of Shandong on April 22, and is now said to be under US protection in Beijing. His wife and young daughter are believed still to be in Dongshigu.

The affair threatens to overshadow annual talks on the Sino-US relationship between US Secretary of State Hillary Clinton, Treasury Secretary Timothy Geithner, and their Chinese counterparts on Thursday and Friday.

Neither the United States nor China has so far commented on Chen's whereabouts, underscoring the sensitivity of the situation.

But Clinton has in the past repeatedly criticised China's treatment of Chen, who won worldwide acclaim for exposing forced sterilisations and late-term abortions under China's policy restricting the size of most families.

He and his family were put under round-the-clock house arrest after he completed a four-year jail sentence in September 2010. He has said he was being punished for defiantly continuing to speak out.

Kenneth Lieberthal, a China expert who was a top aide to president Bill Clinton, said he believed the United States wanted a solution that is "the least embarrassing to China and to do so as expeditiously as possible."

"The question to my mind is whether in China this turns into a political football in a very political season. I think it's more likely to be resolved than to turn into a political football, but you never can predict this stuff," said Lieberthal, a senior fellow at the Brookings Institution.

China is preparing for a once-in-a-decade political handover, with the communist leadership extremely keen to avoid any embarrassments as Vice President Xi Jinping prepares to succeed President Hu Jintao.

The facade of a smooth transition was already shattered when rising star Bo Xilai was dramatically ousted from China's inner circle in a scandal that involved his right-hand man seeking refuge, unsuccessfully, at a US consulate.

With the 2012 campaign well under way in the US, White House hopeful Mitt Romney has criticized Obama's China policy, saying he should challenge the rising Asian power more aggressively over its human rights record, trade practices and military expansion.

He has urged the administration to take "every measure" to protect Chen and his family.

Chen addressed Chinese Premier Wen Jiabao in a defiant video released after he somehow escaped from under heavy guard at his home, saying "Dear Premier Wen, I finally escaped."

He went on to detail the harsh conditions of his house arrest, beatings of his wife and mother at the behest of local officials in his hometown, and demanded an investigation.

Fellow dissident Hu Jia, who says he met with Chen following his escape, said Monday that Chen was "not seeking political asylum" but intended to stay in China and fight for protection of legal rights.