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Is China Coming to a City Near You?

For 15 years Hong Kong has fought to maintain its local identity, language, and culture despite formal unification with mainland China. But as more and more wealthy mainland tourists flood the territory looking to shop, the Hong Kongers's way of life is being challenged.

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Hong Kong, which has a population of 7.15 million, logged 28.1 million tourists from the mainland last year, up from just shy of 7 million in 2002. Chinese tourism magnets such as Paris, Seoul, and Taipei are watching.

Chinese visitors are pumping money into Hong Kong's vast, thirsty retail sector, which is a good thing for the economy, but not good for every local. As international companies catering to tourists have expanded, they've driven up rent, pushing out small shops catering to locals. Prices of daily goods and real estate are also rising, frustrating locals and highlighting significant changes underway in Hong Kong as it modernizes.

(Read More: China Downturn? Don't Look in First Class)

"There's a little bit of emotional adjustment," says Joseph Cheng, political scientist at City University of Hong Kong, noting that the territory once considered itself, in no uncertain terms, better off than the mainland. "Now it's the other way around. They buy our real estate and go to the luxury shops. But on the whole, simply put, this integration is inevitable."

Hong Kong became part of China in 1997 after more than 150 years of British colonial rule. British officials and the native Chinese, who trace their ancestry to southern China, built Hong Kong into an English-speaking financial hub. As part of the handover back to China, it agreed to preserve Hong Kong's economy and ways of life until 2047.

(Read More: Hong Kong 15 Years After Handover: What's Changed?)

Before 2003, Hong Kong only allowed group tours from the mainland, as a way to avoid too rapid of an influx of tourists. But when the SARS epidemic that year slowed tourism to a crawl, the government allowed individual tourists. Today, mainland Chinese make up two-thirds of visitors.

Now, Hong Kong is getting increasingly peeved at the downside to all of these tourists but finding it hard to complain as the mainlanders bring in so much money. Hong Kong is already upset about Beijing's call for more nationalist education, per the protests there in September. There are also conflicts between Hong Kong and mainland Chinese over manners.

Among common flashpoints: Tourists crowd the metro lines, not always lining up as is custom in Hong Kong, but not China, or speaking quietly as expected in public among locals. Hong Kong dwellers say they increasingly feel pressure to learn Mandarin to survive in business. The small, sole-proprietor shops selling sundries, food, and jewelry with the sounds of the island's native Chinese dialect Cantonese are increasingly being replaced by crowded name brand international sellers peddling in Mandarin.

"Most of the smaller enterprises need to learn more about Chinese mainlanders' habits, buying habits, and their culture also," says David Ting, president of the 1,500-member Hong Kong General Chamber of Small and Medium Business. "There are some retailers who know but most don't understand."

Not Just in Hong Kong

Similar trends are emerging in Taiwan, South Korea, and Europe as China's wealthy increasingly prefer to go elsewhere for everything from milk powder to luxury condominiums.

More than 6 million Chinese visited Taiwan in 2011, less than four years after a virtual ban on visits was lifted over security concerns. Last year Taiwan also began allowing solo tourists as a way to stimulate shopping.

About 7.7 million Chinese visited nearby South Korea last year, spending more than $2 billion, according to market research firm Euromonitor International. France saw about 1 million Chinese in 2011 and $503 million in receipts.

"Beijing's grand strategy is to dominate East Asia without war but with economic and cultural tools," says Lin Chong-pin, strategic studies professor at Tamkang University in Taiwan. In France, he adds, Chinese tourists "come and clean up the shops."

Mainland shoppers in Hong Kong mete out an average $1,548 per trip, with 59 percent of that going toward shopping, consumer research firm The Nielsen Co. estimates. And that could easily rise if China meets its recently announced goal of doubling annual incomes by 2020 from an average of $4,940.

Still, at this point no other place compares to Hong Kong on the number of arrivals, proximity to China (it shares a land border), ethnic links, and questions about its political relations with Beijing.

"We are indeed taking on the role of learning and recognizing their culture and language," says Dickson Chan, sales director with the Hong Kong tour operator United Holidays. He suggests that other world cities "learn from visitors and provide the best of services to attract them."
Social, economic tradeoffs?

Along Canton Road, an upmarket shopping district, almost every shopper stopped by a reporter comes from mainland China. Families line up at Gucci and Hermes outlets to take advantage of Hong Kong's product authenticity guarantees and no sales tax, two perks hard to find in the mainland.

"My feeling is that Hong Kong is a big city, with a big city experience, and at the same time prices are cheaper," says Canton Road shopper Deng Yanfei, of Guangdong Province. "Most of us come for the luxury brands like Louis Vuitton."

Mainland shoppers generally go just for international brands, allowing big-name jewelers and clothiers to displace sole proprietors preferred by local shoppers.

"Now normal citizens can't buy from areas near their homes," says Mr. Ting from the chamber of commerce. "All the landlords would like to rent to shops for the big brands."

One independent jeweler just off Canton Road reported no business from mainland Chinese despite heavy pass-by traffic. A tailor in the same mall said only foreigners buy suits from his nonbranded shop.

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