HONG KONG (Reuters) - Hong Kong protesters clashed with police on Saturday in a town near the boundary with mainland China where thousands rallied against the presence of Chinese traders, seizing on another grievance following major unrest over an extradition bill.

Protesters in Sheung Shui, not far from the Chinese city of Shenzhen, threw umbrellas and hardhats at police, who retaliated by swinging batons and firing pepper spray.

“Our lovely town has become chaos,” resident Ryan Lai, 50, said shortly before the protest turned violent.

“We don’t want to stop travel and buying, but please, just make it orderly and legal,” he added, referring to so-called “parallel traders” who buy large volumes of duty-free goods in the town, to be carried into mainland China and sold.

“The extradition bill was the tipping point for us to come out. We want Sheung Shui back.”

The traders have long been a source of anger among those in Hong Kong who blame them for fuelling inflation, driving up property prices and dodging taxes.

Later, police urged protesters to refrain from violence and leave. By about 8:30 p.m. (1230 GMT), most had retreated as police in riot helmets and wielding large shields swept through the town to clear the streets.

Early on Sunday, the Hong Kong government condemned violent acts during the protests, adding that it had already taken steps to tackle parallel trading.

Anti-extradition protesters plan another demonstration on Sunday in the town of Sha Tin, in the so-called New Territories between Hong Kong island and the border with China.

Saturday’s protest, which had begun peacefully, was the latest in more than a month to roil the former British colony, grappling with its worst political crisis since it returned to Chinese rule in 1997.

Sometimes violent, the protests have drawn in millions of people, with hundreds even storming the legislature on July 1 to oppose a now-suspended extradition bill that would have allowed criminal suspects in Hong Kong to be sent to China to face trial in courts under ruling Communist Party control.

Critics see the bill as a threat to Hong Kong’s rule of law. Chief Executive Carrie Lam this week said the bill was “dead” after having suspended it last month, but opponents vow to settle for nothing short of its formal withdrawal.

Protests against the bill had largely centered on Hong Kong’s main business district, but demonstrators have recently begun to look elsewhere to widen support by taking up narrower, more domestic issues.

The Sheung Shui protests opposed small-time Chinese traders who make short trips into the territory to buy goods they then haul back to China to sell. Protesters chanted demands in Mandarin, China’s official language, for the traders to leave.

In a statement on Sunday, Hong Kong’s government said that over the last 18 months it had arrested 126 mainland visitors suspected of contravening the terms of their stay by engaging in parallel trading, and barred about 5,000 mainland Chinese also suspected of involvement.

At Britain’s handover 22 years ago, Chinese Communist leaders promised the city a high degree of autonomy for 50 years. But many say China has progressively tightened its grip, putting Hong Kong’s freedoms under threat with measures such as the extradition bill.

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DEMOCRACY DEFICIT

Hong Kong’s lack of full democracy was behind the recent unrest, said Jimmy Sham of the Civil Human Rights Front, which organized protests against the extradition bill.

“The government, Carrie Lam, some legislators in functional constituencies are not elected by the people, so there are many escalating actions in different districts to reflect different social issues,” he said. “If political problems are not solved, social well-being issues will continue to emerge endlessly.”

One protester said Saturday’s scuffles started when demonstrators charged police who sought to help mainland traders who had assaulted protesters.

“Some people were attacked and got injured in a stampede,” said the man, who would only give the name Ragnar. “I tried to save some girls so I was also attacked by pepper spray by police. Now I feel so bad. The cops are dogs.”

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Protesters ripped up median barriers and fences to set up roadblocks and defenses.

A young man was treated for a bloody head wound a few meters from where police surrounded by crowds were hitting activists armed with umbrellas. Police in riot gear wielded batons to clear the street minutes later and free trapped officers.

“We have no weapons and we were peaceful. When we saw them taking photos of us in the crowd we had to react,” said another protester, surnamed Chan, who declined to give his full name.

“We are all scared now. How can they hit us with batons?” he said, staring at a pool of blood where one of his peers was treated.

The police public affairs office did not have an immediate comment when asked about police actions against the protesters.

Last week nearly 2,000 people marched in the Tuen Mun residential district to protest against what they saw as the nuisance of brash singing and dancing to Mandarin pop songs by middle-aged mainland women.

On Sunday, tens of thousands marched in one of Kowloon’s most popular tourist shopping areas, trying to persuade mainland Chinese tourists to back opposition to the extradition bill.

“We want to raise awareness in Washington that the United States has to do more now to help Hong Kong become fully democratic,” said a resident of the nearby town of Fanling, who was one of five people in Saturday’s crowd carrying U.S. flags.

“They are the most important power left that can stand up to China,” added the 30-year-old man, who gave his name only as David.