So promising are conditions on the mainland that many smaller companies have become eager to shift their operations.

These companies, with market capitalisation ranging from $1 billion to about $5 billion, are seeing Hong Kong more and more as a field for the big players.

'Hong Kong is not a market for us,' said Herman Fung Man-hei, managing director of Hon Kwok Land Investment. 'With every project here you are talking billions of dollars. But we see lots of opportunities within our reach in China.'

Hon Kwok, which built a business over 30 years largely as a redeveloper of old buildings in Hong Kong, was badly hit by the financial crisis of 1997. The company accrued large debts and the creation of the quasi-government Urban Renewal Authority, which favoured large-scale projects, only added to its problems.

At that point, Hon Kwok decided to turn to China, where land costs were low. The firm started to phase out its Hong Kong business in 2001 and stopped all development projects here in 2004.

'The amount you spend on a single tower in Hong Kong covers the cost of five projects in China,' said David Ma Tak-wai, deputy general manager of Hon Kwok Land Investment (China), a subsidiary of Hon Kwok Land Investment.

'China's property market has improved in terms of regulations and market performance,' Mr Ma said. 'A few years ago we bought sites in Guangzhou for a little over 1,000 yuan a square metre. The value has now more than doubled.'

Another encouraging factor for cross-border property developers is that China is now very much on the radar screens of western funds. These investors are a boon to small property players, who find through them shortcuts to profits and ready cash for expansion.

Business is buzzing for Hon Kwok. Last year the company brought in Gateway China Fund as a strategic investor in a residential site in Guangzhou's Liwan district. In December, the firm sold a 40per cent stake in a residential site in Dali Town, Foshan, to Morgan Stanley for $128.76 million. The company has also attracted the attention of German fund DJE Investment, which has built up a 5 per cent holding in Hon Kwok Land over the past two years.

'I am very optimistic about the mainland market,' said Lutz Kihm, an adviser for the German fund.

Mr Ma believes the China market is the answer for small property players who cannot hope to compete in Hong Kong. 'The mainland market is huge and can accommodate both small and big players,' he said. 'The profit margin is also tempting. In Hong Kong you have a 30 per cent profit margin from a project that takes about three years to complete. In China you have a 25 per cent profit margin over a one-year period.'

Far East Consortium is another small developer that has moved operations to China while positioning itself as a boutique hotel operator here. The firm is building California Garden, a complex of more than 8,000 town houses, in Shanghai. Deputy chairman David Chiu Tat-cheong expected the project to be the group's main source of revenue in the next few years.

While many small players are focusing on the small markets of southern China and second-tier cities, there are aggressive players ready for bigger challenges.

Emperor International is investing $1.5 billion in a grade-A office retail development in Beijing, competing with Hong Kong giants such as Sun Hung Kai Properties and Henderson Land Development.

Meanwhile, property management firms are also finding a niche in China. Synergis Holdings is in a property management joint venture with Shui On Holdings in Shanghai to manage Shui On projects there. It is also in a venture with Beijing Capital Land's unit Golden Net to develop the property management business in Beijing.

While all these players believe China is the answer for them, they are also well aware of the risks.

'You must have a local partner,' said Hon Kwok's Mr Ma. 'That's vital in any China project. Guanxi [the relationships network] still prevails in a big way. You must have a local partner to liaise with the authorities.'