BEIJING - China said at least 10 people burnt to death in riots in the Tibetan capital Lhasa, the fiercest pro-independence protests to have rocked the region in two decades, scarring China's image months before the Olympics.

Xinhua news agency said the 10 died in the bitter clashes that erupted in the remote, mountain capital on Friday, having initially said seven. It said no foreigners died but gave few other details.

"The victims are all innocent civilians and they have been burnt to death," an official with the regional government was quoted as saying.

It also said armed police in Lhasa rescued more than 580 people, including three Japanese tourists, from banks, supermarkets, schools and hospitals that were set alight.

More than 160 fires, including 40 major blazes, were reported, it said.

China has accused followers of Tibet's exiled spiritual leader, the Dalai Lama, of masterminding the uprising, which has scarred its image of national harmony in the build-up to the Beijing Olympics and already sparked talk of a boycott.

Tibetan crowds in the remote mountain city attacked government offices, burnt vehicles and shops and threw stones at police on Friday in bloody confrontations that left many injured.

At least one policeman was killed and left lying on the street, a Western envoy said, quoting a foreign witness. Armored vehicles were rolled out, the diplomat added.

A Reuters picture showed a protester setting fire to bicycles and a Chinese national flag. Another showed security personnel shielding themselves against rocks hurled by protesters.

Rioters burned police cars and shops owned by Han Chinese, a Tibetan source said, quoting a witness.

"The protesters wanted to set the Tibet Autonomous Region building on fire," the source told Reuters, requesting anonymity.

Qiangba Puncog, chairman of the Tibet Autonomous Regional Government, told reporters in Beijing that Tibetan authorities had not fired any shots to quell the violence in Lhasa, which Xinhua news agency said had "reverted to calm."

Residents of Lhasa waited anxiously in homes and closed shops on Saturday morning, wondering if the day would bring fresh confrontation.

"It's quite tense still," said one hostel manager who requested anonymity, as did other residents spoken to.

"We don't dare go outside, so I can't tell you what's happening," said one.

Xinhua said its reporters in Lhasa the previous day saw many rioters "carrying backpacks filled with stones and bottles of inflammable liquids, some holding iron bars, wooden sticks and long knives, a sign that the crowd came fully prepared and meant harm."

A Tibetan resident of the old part of Lhasa which saw big protests on Friday said it was too soon to know whether the new day would bring fresh confrontation.

"If there is blood today it will be ours," he said.

NO CHANGE OF POLICY

The riots have emerged from a volatile mix of pre-Olympics protests, diplomatic friction over Tibet and local discontent with the harsh ways of the region's Party leadership which has heated up in past months.

China has said the Dalai Lama engineered what were the biggest protests in the predominantly Buddhist Himalayan region since 1989, a claim he quickly denied.

China has chided the leaders of United States and especially Germany in past months for hosting the Dalai Lama, saying such acts boost what they call his "separatist" goals. It has also urged India to stop protests there by exiled Tibetans.

The hardline Communist Party boss of Tibet, Zhang Qingli, formerly served in Xinjiang, the far western region where China has refined tough controls to counter threats from Uighur Muslim separatists.

While it was uncertain whether the clashes would flare again over the weekend, Beijing has already made clear it saw no reason to change its policies in Tibet, where many locals resent the presence of the Han Chinese, China's biggest ethnic group.

"We are fully capable of maintaining the social stability of Tibet," Xinhua quoted an official as saying in a statement repeated across Chinese state media on Saturday.

China may not respond as harshly as it did to the 1989 protests in Tibet, when now President Hu Jintao was Communist Party boss of the region, but nor will it show any softness, said Drew Thompson, a China expert at The Nixon Center in Washington.

"They allow protests to continue only when they're marshalling forces to put them down," he said.

Already the eruption of popular anger at China's presence in Tibet has become an international issue likely to trouble Beijing's preparations for the Olympics in August.

The Games should be boycotted if Beijing mishandles the protests, Hollywood actor and Tibetan activist Richard Gere said.

(Editing by Nick Macfie and Jerry Norton)