(Adds comment from state media, paragraph 10)
LHASA, China, June 21 (Reuters) - Chinese Communist Party officials in charge of restive Tibet used the passing of the Olympic torch relay through the capital Lhasa on Saturday to defend their control and denounce the exiled Dalai Lama.
The torch procession ended under tight security below the towering Potala palace after having been run for just over two hours before a carefully-selected crowd, some three months after the region was convulsed by anti-Chinese protests.
“Tibet’s sky will never change and the red flag with five stars will forever flutter high above it,” Tibet’s hardline Communist Party boss Zhang Qingli said at a ceremony marking the end of the two-hour relay through strictly guarded streets.
“We will certainly be able to totally smash the splittist schemes of the Dalai Lama clique,” he added, in front of the Potala, traditional seat of the Dalai Lama, the most powerful figure in Tibetan Buddhism.
China accuses the exiled Dalai Lama of inciting protests and riots that erupted in Lhasa and then across wider Tibet in March, in a bid to undermine the Beijing Olympics, which open on Aug. 8. The Dalai Lama denies the charges.
The Beijing Games torch has never been far from controversy, and never more so than in its run through the streets of this 3,650-metre (12,000 feet) high city.
Lhasa was under lockdown with police and troops every few metres along the relay streets, closely watching the groups of residents chosen to cheer on the torch. Shops were shut.
At the start of the relay, groups of students -- Tibetan and Han Chinese -- waved Olympic banners, the Chinese national flag, and the hammer and sickle banner of the ruling Communist Party.
“We are convinced that the Beijing Olympic Games’ torch relay in Lhasa will further inflame the patriotic spirit of the people,” Lhasa’s Communist Party boss Qin Yizhi said at the opening ceremony, adding it would also help “smash the scheming of the Dalai Lama clique”.
The official Xinhua news agency said the torch passed through Lhasa “in a joyful and peaceful atmosphere”. It next heads to the neighbouring province of Qinghai, home to many ethnic Tibetans.
Later in the day, shops re-opened and locals spilled on to the streets. But in the Barkhor neighbourhood of old Lhasa -- a web of alleys centred on the Jokhang temple -- Tibetan residents showed little enthusiasm for the relay and spoke flinchingly of the unrest, crackdown and a dearth of business and jobs.
“It’s still very tense... Best not go out at night,” said one Tibetan jewel shop owner. “We’re waiting for the tourists to come back, but they’re not coming. They’re still too scared.”
Outside his doorway passed a flow of Buddhist pilgrims, locals and Chinese tourists -- but in far smaller numbers than years past, he said. Many shopfronts were shuttered.
Asked about the relay, another local said, “We have other things to think about.” She and the shop owner did not want their names used.
In Dharamsala, the northern Indian town where the Dalai Lama’s government-in-exile in based, a small group of protesters from Students for a Free Tibet paraded around the town’s main square.
They performed a street play that showed China trampling on Tibet.
For many exiled Tibetans and human rights groups, the Lhasa torch relay serves as a sign of China’s overbearing influence.
The officials’ fiery comments about the Dalai Lama also drew criticism from critics who say China has used the Games for its own political ends.
“Tibet does not need this Cultural Revolution-style rhetoric,” said the London-based Free Tibet Campaign’s Matt Whitticase by telephone.
“The Chinese government must engage with the Dalai Lama in substantive talks to lead to a lasting political settlement in Tibet,” he added.
But for many Chinese, outraged by the March unrest and then the protests against China’s rule in Tibet that dogged the international stage of the torch relay, the Lhasa stop of the torch was a proud moment of vindication.
"For me as a son of the Chinese people, the Olympic Games is a grand event we've always looked forward to," said Zha Lang, a retired ethnic Tibetan official who was among those cheering on the square under the Potala. (Additional reporting by Ben Blanchard in Beijing and Abhishek Madhukar in Dharamsala; Editing by David Fogarty) (For more stories visit our multimedia website "Road to Beijing" at here; and see our blog at blogs.reuters.com/china)