A FULL-SCALE riot broke out in Lhasa yesterday, with up to 4,000 Tibetans attacking police and Han Chinese businesses in the city centre, according to witnesses. In probably the worst violence since the imposition of martial law on March 7, 1989, the police and military responded with short bursts of gun fire and massive amounts of tear-gas, the witnesses said. One Lhasa resident, speaking on the telephone, said: ''The police have been launching tear-gas canisters for the last two hours, the whole of the city centre looks like a war zone.'' So far there has been one unconfirmed report of one person being killed and witnesses said they saw dozens of injured police and local residents. ''It was just chaos out there,'' the resident said. Police appeared to have gained control of the city last night but the situation remained tense. The demonstrations reportedly started yesterday morning with about 800 people protesting over price rises, new taxes and the alleged detention of several monks from the nearby Sera Monastery on Sunday. Sunday was the 42nd anniversary of the signing of the 17-point agreement in which the Dalai Lama's government acceded control of Tibet to the Chinese People's Liberation Army. The Sera monks were believed to have raised the Tibetan flag to mark the occasion only to have it torn down by Chinese security officers. The protesters reached the main provincial government building at about 2 pm where about 300 demonstrators, all local Tibetans, stayed hurling insults and spitting at the police surrounding the building. A foreign tourist said: ''The police were absolutely covered in spittle. But they did not do anything, they just stood there.'' The demonstrators broke up after two truck-loads of People's Armed Police officers arrived. By 4 pm however, up to 4,000 demonstrators had re-grouped and embarked on a rampage through the city centre stoning Han Chinese shops and stores which had remained open for business. The influx of Han Chinese entrepreneurs into Lhasa and the rest of Tibet has been a serious grievance of the local population for several years, with Tibetans saying the Hans were stealing their jobs. Some demonstrators also attacked a central police station, in the Barkor, although witnesses said other residents tried to hold them back. After exercising restraint for much of the day, the police and the military responded in the early evening with massive force, firing tear-gas throughout the mainly Tibetan-populated part of the old city and according to two separate witnesses firing automatic weapons into the air. One witness said: ''The gun fire lasted for about 10 minutes. I did not see anyone get hit but people were running everywhere, it was chaos.'' The tear-gas barrage lasted several hours, during which time all foreign tourists were locked into their hotels. The riot comes just one day after a team of high-ranking European diplomats left Lhasa after conducting a week-long fact-finding tour of the region. Security was extremely tight during the visit, diplomats said. At least three Tibetans were arrested in Lhasa just before their arrival, but other reports said as many as 100 might have been detained.