* Thousands defy police in illegal march
* Police, protesters exchange tear gas, petrol bombs
* Hundreds of shops, metro stations trashed
* Protesters say rather die than surrender (Adds latest on protest, fresh quotes)
By Anne Marie Roantree and Marius Zaharia
HONG KONG, Oct 20 (Reuters) - Hong Kong riot police and protesters exchanged tear gas and petrol bombs as an illegal anti-government march that attracted tens of thousands descended into chaos, with hundreds of shops trashed and Chinese banks and metro stations targeted.
After two weeks of relative calm, the major rally showed that the pro-democracy campaign has not lost support and that hardcore protesters will continue to clash with police.
"You can see Hong Kongers won't easily give up their right to demonstrate... today's turnout is more than I expected," said Daniel Yeung, an unemployed protester.
"You can see that as long as people keep coming out in large numbers we are safe and can keep fighting," he said.
Hong Kong has been battered by months of often massive and violent protests over concerns that Beijing is tightening its grip on the city, the worst political crisis since Britain handed the city back to China in 1997.
Protesters threw petrol bombs at the Tsim Sha Tsui police station on Kowloon peninsula after police inside fired volleys of tear gas to disperse demonstrators on the street.
Others erected fiery barriers on Nathan Road, a major retail strip in the Kowloon district, as riot police, shields in front, marched towards them, while others fired tear gas.
Police used several water canon trucks to disperse protesters, spraying jets of blue-dye into the crowds and sending hundreds fleeing. Police have used the blue dye to identify protesters.
It was the heaviest use of water canons by police and many people hit with the water developed coughs, suggesting an irritant may be mixed with the water.
As riot police advanced protesters fell back to their next barricade, unlike past rallies when they stood and clashed with police, throwing petrol bombs and bricks.
Along the march route, protesters trashed metro stations and hundreds of shops, throwing goods onto the streets. Several Chinese banks were targeted.
Protesters have in the past targeted Chinese banks and shops with links to mainland China, leaving mainland Chinese living in Hong Kong worried about their safety.
One trashed shop on Sunday had notices left on its shutters saying it was attacked because it was owned by mainland Chinese mobs who had attacked innocent people. "We never rob. We don't forgive. We don't forget", said the notice.
By nightfall only small groups of protesters remained, with one group throwing petrol bombs down a street towards police who responded with tear gas. Large numbers of riot police guarded several intersections.
Police said they had seized more than 40 petrol bombs that they believe may have been en route to the protest.
They said protesters had set fire to numerous road barriers and trashed shops in several Kowloon districts. Police detonated what they said was an explosive device surrounded by broken bricks and left in the middle of a street.
The unrest was sparked four months ago by a bill that would have allowed extradition to mainland China for trial in Communist Party-controlled courts. It has since widened into a pro-democracy movement.
The protests in the city pose the biggest popular challenge to China's President Xi Jinping since he took power. Beijing has denied eroding Hong Kong's freedoms and Xi has vowed to crush any attempt to split China.
Police had declared Sunday's march illegal due to concerns over public safety. Protesters, ranging from young students to the elderly, many carrying umbrellas to shield their faces from street surveillance cameras, face arrest.
For the first few hours, the march was peaceful.
At the start of the march banners reading "Free Hong Kong" stretched across the ground. Other posters read "HongKongers Resist", while graffiti on one wall said "Better Dead than Red".
Hardcore protesters set up road blocks and sprayed graffiti saying: "We chose to die on our feet rather than live on our knees!" Some tore up pavement bricks for clashes with police.
Protesters believe the police's refusal to issue a permit for Sunday's march was an attempt to limit their numbers, as some would fear being arrested.
"The government pretends we just want to destroy the city. We'll be out for as long as it takes to let the world know it is them who are destroying it," said Ray, 24, who planned to go home after a few hours as he feared arrest.
Hong Kong is governed under a "one country, two systems" formula, which permits the city freedoms not available on the mainland such as an independent judiciary.
Protesters are angry at Hong Kong's leader Carrie Lam for what they see as her failure to protect those freedoms from an encroaching Beijing, imposing colonial-era emergency powers, and allowing what they say is excessive force by police.
"Carrie Lam is not listening to us at all. This may work in China but not in Hong Kong," said Cheung, a 33-year-old woman wearing a face mask and black T-shirt.
Lam's annual policy speech last Wednesday failed to address protesters' demands.
Protesters have five core demands: universal suffrage, an independent inquiry into police action against protesters, amnesty for those charged, an end to describing protesters as rioters, and the formal withdrawal of the extradition bill.
Lam has said the bill is dead, but it is yet to be formally withdrawn. She has rejected the other demands. On Sunday she said a police complaints inquiry will be completed by December.
Two people have been shot and wounded by police and thousands injured since the protests escalated in June. Police have arrested more than 2,300 people.
The Asian financial hub is facing its first recession in a decade because of the unrest. (Reporting by Twinnie Siu, Jessie Pang, Clare Jim, Sarah Wu, Donny Kwok, and Tom Westbrook Writing by Michael Perry and Farah Master Editing by Richard Pullin/ Raju Gopalakrishnan/Frances Kerry/Susan Fenton)
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