Outside the schoolyard, Ah Qing cradles the bomb in his palm. Called a "mountain pig" for its ferocity, the homemade grenade, loaded with gunpowder and wrapped with duct tape, is the size of a hockey puck. A bell rings and kids surge through the middle school's iron gate. Ah Qing, a lanky 16-year-old in fashionably pleated orange pants, hurls his weapon. Pedestrians scream and duck for cover as white smoke from the explosion wafts over their heads. The targets, two 13-year-olds, had refused to pay "compensation" after breaking a toy car belonging to a member of Ah Qing's gang. The detonation leaves a harmless smear on the sidewalk—this time anyway. "Students who aren't in gangs better stay clear," Ah Qing says later. "Trouble gets them a mountain pig."

Kids make up China's fastest-growing criminal group. The number of offenders under 18 has more than doubled to 12% of all those convicted in China between 1997 and 2000, the last year of full statistics. These aren't artful dodgers nicking change to pay for their porridge. Teen crime is increasingly violent, with rape and assault especially common. In Zhengzhou, capital of Henan province in central China, police in April arrested a gang of 15 boys aged 13 to 15 who had allegedly raped seven middle school girls after waiting for them outside the schoolyard gates. This summer, police in Tianjin near Beijing arrested a gang of a dozen youths, led by a 16-year-old girl, for smashing pedicab drivers over the head with bricks to loot a few dollars from their pockets (no driver was killed). In June two teenagers incinerated 25 people in an Internet parlor in Beijing after the owner had kicked the two out for not paying to play online war games. China's most recent headline-grabber was the note left behind by Gao Yang, a 16-year-old in Shandong province who in September stabbed his English-language teacher 40 times with a 30-cm watermelon knife. He listed his favorite things: the drug ice, the Chinese song Teeth for Teeth, Blood for Blood and his personal motto—"I owe the world nothing."

As the experts see it, a moral vacuum is driving such kids to bomb and bash. Communist ideals like "comradeship" have proved bankrupt, and the dubious ethics of rapacious capitalism haven't filled the void. Ask Chinese teenagers to name a hero and most draw a blank. The moral ABCs they learn at school seem to come from a different language—children still study propaganda idols like Lei Feng, the soldier who loved communism so much he secretly darned his comrades' socks. Religion, discouraged by the government, hasn't plugged the morality gap. Even after-school activities like team sports, normal in most countries, are rare in China. Families, once the bedrock of Confucian society, are meant to take up the slack, but they suffer a divorce rate that has quadrupled in the past two decades to 10%. A quarter of juvenile delinquents—many of them from middle-class families—come from these broken homes. "There's a deep gap between the values kids are taught and what they see around them," says Sun Dongdong, a forensic psychiatrist at Peking University who studies youth crime. "They form gangs to fight the emptiness."

Most worrisome, youth violence has soared even more than the statistics show. Thanks to the one-child policy, the ratio of kids under 14 has fallen from 28% of the population a decade ago to 23% today. Youth crime as a fraction of total crime should have dropped accordingly. Its stubborn climb raises fears that as these juveniles enter adulthood, the overall crime rate in China will rise even beyond the 21% increase recorded from 1990 to 2000. Three out of every four youth crimes are committed by gangs, many with connections to hardened criminal syndicates. The ties these juveniles build in childhood could bind them together for a lifetime of lawbreaking, says Shan Guangnai of the Chinese Academy of Social Sciences. 'With this many kids going bad," he says, "it looks to me like society is falling apart."

Spend some quality time with a hoodlum like Ah Qing and you're likely to agree with that bleak assessment. The night after his bomb attack, he drinks beer with his "little brothers" in an outdoor night market in Sanya on tropical Hainan Island. Nearby, guys in their 20s with tattoos made by jabbing ink-soaked needles into their own arms are gambling at cards or shooting billiards. It's the kind of place where petty crime breeds felonies. A few weeks ago, one of Ah Qing's "big brothers"—hardened criminals often mentor and outsource to teen gangsters—wanted to punish the owner of an illegal gambling den who hadn't paid his protection money. He dispatched Ah Qing and his gang, all of them years away from a daily shave. They stormed in, grabbing cash and overturning tables. Ah Qing remembers it with pride between drags on his cigarette. "I wouldn't kill anyone, even if a big brother asked me to," he says. "But I'd cut off a finger."

The government devotes few resources to helping kids like Ah Qing. Because most cities have only one juvenile detention center, which is usually overcrowded, "teenagers are too often sentenced to adult prisons," says Pi Yijun, a professor at Beijing's Politics and Law University. For people like Big Friend, a 26-year-old in the northwestern city of Yinchuan in Ningxia Huizu province, the adult labor farm he was sentenced to for two years at age 17 was merely a finishing school for aspiring thugs. He spent evenings chatting with cellmates about the money they would extort after their release. "Of course I stayed in touch with my friends there—contacts are helpful," he says. Today they're the loan sharks who hire Big Friend to knock the heads of hapless clients with unpaid debts.

For many of these lost youths, gangs provide a kind of surrogate family and a reassuring sense of community. Loverboy, whom TIME first met in Yinchuan a year ago when he was 16, modeled his crew on the gangsters he had admired in Hong Kong triad flicks. During initiation, he and two comrades burned incense, drank beer laced with each other's blood and pledged to die fighting for their honor. One of them was Cool Dragon, the son of a police officer, who once bludgeoned a boy into a coma. "I felt angrier the more I beat him," he recalls. The youngest was Backstreet Boy, a 14-year-old with a sweet face and a swastika tattooed on his arm because "Hitler was cool."

Loverboy—most of the juveniles adopt gang aliases—ran a protection racket in school. When a classmate refused to pay, Loverboy and his two followers trundled him into a taxi and drove him to a cemetery on the edge of town. "I did like in the movies," he says. "I made him call me big brother. I beat him with the dull edge of my knife. He was bleeding badly. I made it last two hours and left him there." Mostly, though, the gang hung out in the apartment of an older tough, playing pirated Nintendo games and waiting for their beepers to squeal with orders from a big brother, in this case Big Friend himself.

Big Friend, whose scalp is crisscrossed with knife scars, has occasionally turned to Loverboy's gang when he needs more fists. Once, he had them destroy the home of someone who defaulted on a debt. "We smashed the furniture and beat up everybody inside," says Loverboy. Backstreet Boy nonchalantly describes kicking the man's elderly father in the head, saying, "I spared the grandmother because she begged for mercy."

Loverboy yearned to graduate his gang from milk-money racketeering to the hard-core business of loan sharking. But the dream fell apart a few months ago. Police arrested Backstreet Boy and Cool Dragon for mugging a shopper in broad daylight on Yinchuan's most fashionable street. Backstreet Boy caught a two-year sentence to a juvenile prison; Cool Dragon's parents pulled police strings to get their son released and sent him to a school in another province. Then came the fight outside the disco. Nobody remembers how it started, but it ended with the owner of the apartment where Loverboy liked to hang out being stabbed to death. On a recent day, Loverboy tallied his losses. One friend dead, one in jail, one sent away. Big Friend is still around—recently released from a jail term for battery—but Loverboy now tries to avoid him. "I wanted to be the wrong kind of leader," he says. "I'm trying to go straight. Maybe it's not too late." For many of his peers, it already is.