By Donny Kwok and Diana Chan
HONG KONG, Oct 10 (Reuters) - Thousands of protesters regrouped in central Hong Kong on Friday to push their demand for democracy, a day after the government called off talks with students amid a two-week standoff that has shaken communist China's capitalist hub.
The political crisis has seen tens of thousands take to the city streets to push for free elections and seek the resignation of Hong Kong leader Leung Chun-ying.
Scores arrived with tents, suggesting they were in for the long haul despite a call by police to remove obstacles that have blocked major roads in and out of the financial center, causing traffic and commuter chaos with tail-backs stretching for miles.
Police said they would take action at an appropriate time, without specifying what that would be.
"I've just set up camp here under the bridge and I will come down to occupy whenever I can," said Wong Lai-wa, 23. "I may have to go back to school during the day, but I will make every effort to come back."
China rules the former British colony through a "one country, two systems" formula which allows wide-ranging autonomy and freedoms not enjoyed on the mainland and specifies universal suffrage as an eventual goal.
But Beijing said in August it would screen candidates who want to run for the city's election for a chief executive in 2017, which democracy activists said rendered the notion of universal suffrage meaningless.
China has branded the protests illegal and on Friday criticized the U.S. Congress for sending the "wrong message" to demonstrators, in a "deliberate attack" on China.
In an annual report to U.S. Congress, the Congressional-Executive Commission on China said Washington should boost support for democracy and universal suffrage in Hong Kong.
Speaking in Berlin, Chinese Premier Li Keqiang said: "Hong Kong's affairs belong to the internal affairs of China and all other countries must respect each others sovereignty."
He added there had been and would be no change in China's policy on Hong Kong's autonomy.
"I am sure the people of Hong Kong and the government of Hong Kong have the competency to ensure the wealth and stability of society," he said.
German Chancellor Angela Merkel said she hoped protests would remain peaceful and "solutions can be found in a free exchange of opinion which will satisfy the people of Hong Kong."
The protesters are well equipped to sit it out, with supply stations stocked with essentials. They also have makeshift showers and dozens of tents pitched where they can sleep.
"Everyone is trying to create his own space, or to defend his own position," said Travis Chu, sitting with four friends in the Admiralty district. "Even though it seems things are in a bottleneck now, all we can do is to stay on and continue the occupation."
Admiralty is home to government offices next to the Central business district, giving the name to the "Occupy Central" movement, which has combined with the student protests to try to push the government to introduce universal suffrage.
The crowd had built to over 1,000 in the gritty, crowded suburb of Mong Kok, on the Kowloon side of the harbor, scene of some of the most violent clashes between protesters and police and pro-Beijing groups last week.
The government's decision on Thursday to call off the talks with students came as democratic lawmakers demanded anti-graft officers investigate a $6.4 million business payout to the city's pro-Beijing leader, Leung Chun-ying, while in office.
Australia's Fairfax Media this week revealed the business payout to Leung by an Australian engineering company.
Hong Kong Chief Secretary Carrie Lam said the talks with the students were off because of the strident demands for universal suffrage, which she said was not in accordance with the city's mini-constitution, and because of their "illegal" occupation of parts of the city and calls for people to rally.
Scenes of tear gas wafting between some of the world's most valuable buildings, violent clashes, mass disruptions to business and commuter chaos have underscored the challenges Beijing faces in imposing its will on Hong Kong.
Protest numbers have dwindled to just a few hundred people at various sites, but activists have managed to keep up their blockade of some major roads, frustrating some residents.
While the largely young crowds sit it out, their democratic lawmaker allies are stepping up pressure on the city government.
On Thursday, they threatened to veto some government funding applications, although none that affect people's daily lives, as they step up their civil disobedience campaign and try to paralyze government operations.
(Additional reporting by Clare Baldwin and James Pomfret, Noah Barkin and Andreas Rinke in Berlin; Writing by Nick Macfie; Editing by Jeremy Laurence and Crispian Balmer)