Hong Kong  - An Australian student accused of killing a Hong Kong taxi driver in a late-night crash was on bail Saturday after a murder charge against him was reduced to manslaughter.

Kelsey Mudd, 22, was initially charged with murder and placed in custody after the taxi he was a front seat passenger in broke through a crash barrier and collided with three other cars on June 27.

The crash reportedly happened after a dispute between Mudd and taxi driver Wong Chi-ming, 58, a father of two who was declared dead in hospital hours later.

At a court hearing Friday, however, prosecutors downgraded the charge from murder to manslaughter. No plea was entered and Mudd, whose father and stepmother attended the hearing, was granted bail until September 23.

Prosecutor Edmond Chan told an earlier hearing that Mudd was three times over the drink-drive limit at the time of the crash in the early hours of a Saturday morning.

After paramedics removed the taxi driver and tried to treat Mudd's injuries at the scene, Mudd allegedly jumped into the driver's seat and drove the taxi off into the path of oncoming traffic.

The taxi travelled only about 50 metres before colliding with another taxi, injuring the 44-year-old driver of the second cab. Two female passengers in the taxi were uninjured.

Mudd's lawyer Ian Polson has said that the incident was a traffic accident while his family insist he did nothing wrong and that the taxi simply rolled down a slope after the fatal crash.

Mudd, who holds both Australian and US passports, was born in Hong Kong but moved to the US as a child and is a student at a US university.

Described by his family as a "hard-working, quiet, responsible young man," he was spending the summer in Hong Kong and working with a charity for disabled children at the time of the accident in June. (dpa)