A police officer attacks protesters holding up umbrellas in Hong Kong on Saturday.

Clashes broke out between police and Hong Kong demonstrators on Saturday as the latest anti-government protests took aim at traders coming across the border from mainland China.

Police used pepper spray and batons against masked protesters in Sheung Shui, a town near the border with China, after thousands marched to complain about "parallel traders".

Sheung Shui boasts dozens of pharmacies and cosmetic stores that are hugely popular with mainland merchants who snap up goods in Hong Kong — where there is no sales tax — and resell them across the border.

Protesters used water bottles to clean their eyes of pepper spray while one demonstrator was bleeding from a head wound, an AFP reporter said.

Hong Kong has been rocked by a month of huge peaceful protests as well as a series of separate violent confrontations with police sparked by a law that would have allowed extraditions to mainland China.

Last month its parliament was trashed by hundreds of masked, youth-led protesters in unprecedented scenes.

The bill has been postponed following the huge backlash.

But that has done little to quell public anger which has evolved into a wider movement calling for democratic reforms and a halt to sliding freedoms in the semi-autonomous hub.

Anger towards police also remains high after tear gas and rubber bullets were used against demonstrators.

Parallel traders have long been a source of tension.

While they bring business to regions near the border, many locals complain about the huge daily crowds and the rent hikes that come with the booming trade.

In recent years there has also been a backlash against the influx of mainland tourists and immigrants, with more hardcore protesters describing them in derogatory terms such as "locusts".

Some one million mainlanders have moved to Hong Kong since its 1997 handover, a flashpoint issue in the notoriously overcrowded city which already boasts one of the world's most expensive property markets.

The anti-government protests have evolved since the extradition bill was temporarily shelved.

Protesters are now demanding the bill be scrapped entirely, an independent inquiry into police use of tear gas and rubber bullets, an amnesty for those arrested and for the city's unelected leader Carrie Lam to step down.