BEIJING, Jan 1 (Reuters) - A group of disgruntled Chinese investors took to the streets on Friday to kick off 1999, while an activist revealed plans to form a labour party, heralding what is expected to be a tense and turbulent Year of the Rabbit.

Chinese President Jiang Zemin renewed an overture to rival Taipei, saying reunification between China and Taiwan could be achieved and that political differences could be ironed out in a "fair and reasonable" manner through dialogue.

Friday's protest outside the Zhongnanhai leadership compound and the plan to set up an opposition party in defiance of a decades-old ban on new political parties touched on raw political ground.

They highlighted the political perils China faces as the Communist Party struggles to curb social unrest linked to unemployment, while struggling to prevent an economic slowdown from creeping in amid Asia's financial crisis.

Millions have been thrown out of work as part of an overhaul of ailing state-owned enterprises.

Despite a ban on demonstrations, police did not stop about 50 people, many of whom were laid-off state workers, from staging a peaceful, silent sit-down protest outside Zhongnanhai, headquarters of the Communist Party.

Dozens of uniformed and plainclothes police stood guard, preventing journalists from speaking to the protesters, who had been cheated in a multi-million dollar futures market scam.

One investor had told Reuters about the planned protest.

The investors have staged several protests outside the Communist Party headquarters since August to demand help from the government after a military-affiliated futures brokerage defaulted on repayment of investments.

On the political front, exiled dissident Lian Shengde revealed that a group of editors of an underground, anti-Beijing e-mail magazine plan to set up the Chinese Labour Party in April to challenge Communist Party rule.

Editors of the magazine would try to register the party with the Ministry of Civil Affairs in Beijing, he said.

"We are not demanding elections or that we become the ruling party now," Lian told Reuters, speaking by telephone from Washington, D.C.

"The Chinese Labour Party will fight to protect the rights of workers and check on the Communist Party and corruption."

China signed in October the U.N. International Covenant on Civil and Political Rights, which guarantees among others freedom of assembly.

But the Communist Party has made crystal clear that it will not tolerate any challenges to its monopoly on power.

Last month, veteran pro-democracy activist Xu Wenli was jailed for 13 years for subversion for trying to set up the opposition Chinese Democratic Party. Qin Yongmin was condemned to 12 years in prison and Wang Youcai to 11 years.

President Jiang has vowed to "nip in the bud" subversive activities.

Lian was himself involved in the establishment of the underground Chinese Freedom and Democracy Party in 1994. He fled to the United States in 1994 after the authorities launched a crackdown on the now-defunct Freedom and Democracy Party that landed 18 people in jail for up to 20 years.

Lian, jailed for two years for his role in the 1989 Tiananmen Square student-led demonstrations for democracy, declined to say how many members the Chinese Labour Party had.

Meanwhile, President Jiang tried to woo Taiwan.

The official Xinhua news agency said Jiang expressed "deep concern for the reunification of the motherland."

"All the political differences between China's mainland and the Taiwan authorities could be solved in a fair and reasonable manner through talks and negotiations," Jiang said.

He "firmly believes the reunification of the motherland could be achieved with the concerted efforts of all the Chinese people including the compatriots from Taiwan," Xinhua added.

Beijing has considered Taiwan a rebel province since the Communists won the Chinese civil war and drove the defeated Nationalists into exile on the island in 1949.