Riot police advanced on Hong Kong democracy protesters in the early hours of Monday, firing volleys of tear gas in the worst unrest there since China took back control of the former British colony two decades ago.

Protesters erected barricades to block security forces amid chaotic scenes still unfolding as the city centre - one of the world's major financial districts - opened for business.

Several Hong Kong financial firms advised staff to work from home or go to secondary offices, as Standard Chartered and Bank of China suspended some of its banking operations, due to "situations in certain areas".

Many protesters in the city's Admiralty district refused to retreat and spent the night on the main highway [AP]

Many roads leading to the Central business district remained sealed off as thousands defied police calls to retreat.

Also on Monday, the popular photo-sharing app Instagram was blocked in mainland China. 

Al Jazeera's Adrian Brown, reporting from Beijing, confirmed the outage saying "many photos from the protests were being posted on the app, and it seems that China wants to starve this story of oxygen".

He added that other blogs that mention the words "occupy" and "central" were also having problems.

Earlier the same day, police baton-charged a crowd blocking a key road in the government district in defiance of official warnings that the demonstrations were illegal.

Several scuffles broke out between police in helmets, gas masks and riot gear, with demonstrators being angered by the firing of tear gas, last used in Hong Kong in 2005.

Thousands of protesters were still milling around the main Hong Kong government building, ignoring messages from student and pro-democracy leaders to retreat for fear that the police might fire rubber bullets.

The protests fanned out to the busy shopping district of Causeway Bay and across the harbour to Mong Kok, posing a greater challenge for authorities to contain, local media reported.

The protesters also brought traffic to a halt and called on Hong Kong leader Leung Chun-ying to step down.

Police, in lines five deep in places, earlier used pepper spray against activists and shot tear gas into the air.

The crowds fled several hundred metres, scattering their umbrellas and hurling abuse at police they called "cowards".

'One country, two systems'

Britain returned Hong Kong to Chinese rule under a formula known as "one country, two systems" that guaranteed a high degree of autonomy and freedoms not enjoyed in mainland China.

Universal suffrage was set as an eventual goal.

But Beijing last month rejected demands for people to freely choose the city's next leader, prompting threats from activists to shut down the Central business district. China wants to limit elections to a handful of candidates loyal to Beijing.

Communist Party leaders in Beijing are concerned that calls for democracy could spread to cities on the mainland.

In a move certain to unnerve authorities in Beijing, media in Taiwan reported that student leaders there had occupied the lobby of Hong Kong's representative office on the island in a show of support for the democracy protesters.

Hong Kong leader Leung had earlier pledged "resolute" action against the protest movement, known as Occupy Central with Love and Peace.

"The police are determined to handle the situation appropriately in accordance with the law," Leung said, less than two hours before the police charge began.

Police denied rumours that they had used rubber bullets.

A spokesperson for China's Hong Kong and Macau Affairs Office said the central government fully supported Hong Kong's handling of the situation "in accordance with the law".

Organisers said as many as 80,000 people thronged the streets in Admiralty district, galvanised by the arrests of student activists on Friday.

A week of protests escalated into violence when student-led demonstrators broke through a cordon late on Friday and scaled a fence to invade the city's main government compound.

Police used pepper spray to disperse the crowd. The Hong Kong Federation of Students has extended class boycotts indefinitely and called on the city's leader to step down.

Police have so far arrested 78 people, including Joshua Wong, the 17-year-old leader of student group Scholarism, who was dragged away after calling on protesters to charge the government premises.

Wong was released without charge on Sunday night. He told reporters he planned to return to the protest site after resting. Other student leaders, Alex Chow and Lester Shum, have also been released.

Source: Al Jazeera and agencies