Would-Be Capitalists Riot in China : Protests: Police fire small arms and use tear gas as thousands run amok in southern city, charging stock-sale corruption.

Thousands of would-be speculators clamoring for a chance to buy stocks in the southern city of Shenzhen abandoned unruly lines and rampaged through the city Monday to protest alleged corruption in stock sales.

Police fired small arms and used tear gas in an attempt to control the crowds, which had lined up since the weekend at 302 banks and brokerage houses to buy stock-purchase applications. The English-language Hong Kong Standard said one of its photographers saw a man fall bleeding after police fired into a crowd. His condition was not immediately known.

Protesters chanting “Down with corruption!” attacked plainclothes police, overturned vehicles and set a van on fire, according to reports from Shenzhen.

The eruption of violence, the most serious public disturbance in China since the 1989 crackdown on the pro-democracy movement in Beijing, may have unpredictable consequences on the course of economic reforms.

The reformist wing of the Communist Party has argued vehemently in recent months that only by pressing forward with capitalist-style reforms can China achieve the economic growth needed to ensure political stability.

Hard-liners are likely to point to the rioting as a sign that reforms themselves carry the threat of political unrest. Reformers could counter, however, that the rioting shows the need to satisfy a public desire for faster reforms, including expansion of stock issues to satisfy market demand.

China’s limited issues of new stocks are seen by many here as an almost sure-fire investment, and authorities have sought to bring order to the market by requiring would-be investors to first buy stock-purchase applications at 100 yuan ($18) each.

Under the system used in Shenzhen, applications merely give investors the right to participate in a lottery for rights to buy new stock issues. Only those who buy applications and then win in the lottery are allowed to buy the stocks. Authorities had announced that 10% of the forms would be selected in the drawing, with each carrying the right to buy 1,000 shares. Would-be investors are primarily concerned with the right to buy some kind of shares rather than the question of what company’s stock to buy.

One result of this system is that the applications themselves have a black-market resale value greater than the initial purchase price.

“We’re angry,” declared a protester quoted by the British news agency Reuters. “Police used their power to get their relatives into the best places in the lines.”

Reuters reported that at least six vehicles, including one police car, were overturned by rioters and that police fired at least 10 tear-gas shells in one part of the city. Police also shouted over bullhorns that more applications would go on sale today, but few in the crowds seemed to believe them.

Times staff writer Holley reported from Beijing and special correspondent Courtney from Hong Kong.