KUALA LUMPUR, May 30 (AFP) - Senior leaders of Malaysia's largest Chinese party debated Wednesday whether to go ahead with a planned newspaper takeover deal which has divided the party and sparked angry protests in the Chinese community.

Leaders of the Malaysian Chinese Association (MCA), the second-largest party in the ruling National Front coalition, began their meeting as protesters outside denounced what they called a blow to press freedom.

Riot police moved in to break up a scuffle which broke out when one MCA MP made an obscene gesture to protesters, witnesses said.

Police later ordered the crowd to disperse.

MCA leaders were discussing a deal which would give the party control over two independent Chinese-language dailies.

Huaren Holdings, the MCA investment arm, sealed a preliminary agreement late Monday to acquire a 72 percent stake in Nanyang Press for 230.12 million ringgit (60.6 million dollars) in cash.

Nanyang Press publishes Nanyang Siang Pau and China Press, which have a combined circulation of nearly 400,000. The deal is due for completion Thursday unless the party reverses its stance.

The Chinese press in Malaysia has traditionally been more independent than the English- and Malay-language media. Opposition to the deal has come both from supporters of the opposition and the government.

At a morning protest meeting the influential Malaysian Chinese Chambers of Commerce spoke out against the deal.

On Tuesday evening Health Minister Chua Jui Meng, an MCA vice president, came out publicly against the takeover, which has been proposed by party president and transport minister Ling Liong Sik.

Other leading party members including Ling's own estranged deputy Lim Ah Lek have also expressed opposition.

Opposition party leaders and representatives of dozens of Chinese groups joined in the morning protest.

"This is an effort to stifle the voice of Nanyang and China Press," said Wan Azizah Wan Ismail, head of the National Justice Party.

Ling has said there would be no political interference in the newspapers.But Wan Azizah said the fact that at least eight senior staffers had been asked to leave the papers showed the MCA had "more than an economic agenda".

Malaysian People's Party president Syed Husin Ali said the acquisition of the two papers was not a normal business transaction but a "business to control the voice of the people".

Activist Kua Kia Soong urged the Chinese community to stop buying or advertising in the papers.

Lim Guan Teik, president of the Malaysian Chinese Chamber of Commerce, told reporters his association was willing to bear any monetary losses incurred by the MCA should it withdraw from the deal.

"I appeal to the MCA to seriously listen to the voice of the people they claim to represent, and to withdraw," he said.

Health Minister Chua said in a Tuesday night statement the MCA risked an open split with its own community.

"The gap is now big and growing and as a party leader, I feel this is disturbing."

Chua noted that the Chinese community in the last two general elections had strongly supported the MCA. "Do we now ignore their views, do we wish to risk an erosion of their support?"

Prime Minister Mahathir Mohamad, who is appointing two senior Chinese staffers to mend fences with the community, has stayed aloof from the controversy, saying it was up to the MCA to sort out.

Chinese make up about a quarter of Malaysia's population.