Call it a Hong Kong property developer dilemma. Imagine their facial expression upon reading the story that they were outbid by a mainland rival in the land auction – again. On Wednesday, state-owned Minmetals Land topped all 12 bidders and won a small residential site for HK$4 billion (US$512 million), or about 40% over the street estimates. Interestingly enough, it was the first tender made by this rather inactive Hong Kong listed company, which was capitalized at around HK$3 billion (US$ 384 million), or among the smallest mainland property companies. In other words, the property flagship of China Minmetals Corporation paid more than its market worth in the land tender. It is not shocking that wealthy Chinese developers are increasingly aggressive in expanding its land bank to Hong Kong. From Vancouver to Tokyo to London, the Chinese buyer is the primary reason behind their property boom. But what is shocking is the speed of the Hong Kong developers, known in the world for their fat 50% gross profit margin, being marginalized in the wake of the rapid expansion of their mainland counterparts. A tally of the major property deals in the recent three years showed the Chinese developers paid more than HK$70 billion (US$8.97 billion) for buying up new land or buildings in Hong Kong. That included a HK$47 billion (US$ 6.02 billion) of new land that these Chinese developers including China Vanke, China Overseas, Citic, Poly, Fosun and others paid from 2013-16. The mainland acquisition binge accounted for roughly a quarter of the government land revenue in the same period. Starting last year, the Chinese began to buy up new Grade A office buildings in Hong Kong – most notably Guangzhou-based Evergrande paying a record HK$12.5 billion (US$1.6 billion) for one single building in Wanchai and China Life and Shenzhen-based Cheung Kei Group to pay a total of HK$10.35 billion (US$ 1.32 billion) for One Harbour Gate in Hung Hom. These new kids of the block add a new dimension to the Hong Kong property market oligopoly, which has seen prices going one direction in the last four decades because of the city’s limited supply. According to Jones Lang LaSalle, one in 10 families opting for new homes in the private market could end up living in properties owned by mainland developers by 2019. That does not necessarily mean the high-priced property boom in Hong Kong will end. It just means Hong Kong’s top six developers – namely Sun Hung Kai Properties, Cheung Kong Property, Henderson Land, New World Development, Wheelock and Sino Land – are not getting their land, not to mention their smaller competitors. On Thursday, the Secretary for Development Paul Chan acknowledged that increasing number of mainland developers have taken part in public tenders over the past three years, but made clear that the government welcomed more competition. That was consistent to the government policy under Chief Executive Leung Chun-ying who has introduced various taxing and increasing market supply to cool down the surging property market. Leung was not popular among property landlords, especially tycoon Li Ka-shing, who has been selling down his property and retail assets in China and Hong Kong and adding weight to his European’s telecom and utilities. But Beijing appears to endorse the new property game of land being an effective tool to tighten control over Hong Kong since the take-over in 1997. It is especially true because President Xi Jinping wants a power rebalancing in Hong Kong, where it is unofficially ruled by the city tycoons. The shift in strategy comes at a time when mainland property developers are seeking to diversify to reduce their risks by investing outside China, and the first stop is naturally Hong Kong. Minmetal’s company executive made it clear that its next stop is real estate in Australia, where its parent company China Minmetals has big operation in zinc and copper mines. Yes, these companies might look aggressive in bidding, but not compared with the tender in mainland cities which broke record highs almost every time. When it comes to investing in Hong Kong, Chinese companies enjoy a price tag of 20% discount because of favorable currency exchange. And once the money is out, it will stay outside because of the lower interest rate and foreign exchange risks, especially in the current depreciation cycle. In the days ahead, more Chinese companies are likely to take an increasingly active role in Hong Kong, seizing control over strategic assets in aviation and telecom assets and now real estate and possibly banking in a not so distant future. Still, the property companies can count their blessings because sooner or later when the land bank runs out, they will become the takeover targets too.