SYDNEY, May 15 (Reuters) - Looters ransacked Chinese-owned businesses in Papua New Guinea's second-largest city of Lae during riots in which one young man was reportedly hacked to death, PNG media reported on Friday.

Thousands of men and boys stormed Chinese shops in the main business district of Lae on Thursday, bringing the entire city to a standstill and catching police off guard, reports said.

The National newspaper reported that police did not know the cause of the riot, although anti-Chinese sentiment has been growing among indigenous Papua New Guineans. Chinese immigrants own many small businesses in Lae and the capital Port Moresby.

The National newspaper said one Chinese shop in Lae was attacked by a gang of youths angry he was operating there and demanding businesses be restricted to Papua New Guineans.

A young man in another group was chopped to death and another hospitalised after trying to break into another Chinese-owned shop, it said. It was unclear from the report if the dead person was Chinese or Papua New Guinean.

The Post-Courier newspaper said a man was shot in the leg by police while trying to steal from another shop.

Local authorities could not be reached for comment.

Last week, construction of a nickel mine and processing plant was stopped after a fight between about 70 Papua New Guinean and Chinese workers.

The mine's part owners, Australia's Highlands Pacific Ltd <HIG.AX>, said on Friday work had resumed on the $1.7 billion project. Fighting had broken out between workers and villagers angry at Chinese managers over an industrial accident.

The project is majority-owned by state-owned China Metallurgical Construction Group Corp. Local workers protested last year over working conditions at the remote site.

A mountainous nation of some 6 million people north of Australia, Papua New Guinea is rich in a variety of minerals and other resources but has significant crime problems.

About 85 percent of its people eke out subsistence lifestyles in jungle-clad mountain villages. (Reporting by James Regan; Editing by Paul Tait)

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