The idyllic Austrian village of Hallstatt boasts fine traditional wooden chalets, ancient churches and breathtaking panoramic views over its own lake and the surrounding snow-capped Alps: "Many describe it as the most beautiful lakeside village in the world," insists the local tourist board.

Nobody, it seems, would agree more with this assessment than the Chinese. And it has emerged that a development corporation in the distant southern province of Guangdong is busy building a carbon copy of Hallstatt, which it has started advertising as a "low density, high-end residential development with mountain and lake views".

The news has come as a shock to Hallstatt's 800 residents. The beauty of their village may have earned it Unesco World Heritage site status, but nobody in the picturesque tourist magnet in the heart of Austria's Salzkammergut had any idea the Chinese planned such a project, let alone that they would go ahead and build it.

"The people are not very amused that this has happened behind their backs," is how Hallstatt's mayor Alexander Scheutz put it. "But I found myself confronted with a fait accompli. I am stunned," he admitted. Mr Scheutz said he had complained to Unesco about the Guangdong project.

The Hallstatters have concluded that a team of Chinese "spies" must have mingled among the estimated 800,000 tourists who visit the village each year. They are believed to have taken hundreds of photographs for use as the basis for the housing scheme in the town of Huizhou, north of Hong Kong.

Monika Wenger, the proprietor of a 400-year-old inn in Hallstatt said most villagers she had talked to were "outraged – not about the fact but the approach" taken by the Chinese. "I don't like the idea a team was here for years measuring, photographing and studying us," she said, "I would have expected them to approach us directly – the whole thing reminds me of Big Brother."

Mrs Wenger found out about the Huizhou project only earlier this month. A Chinese woman staying at her hotel allowed her to look at drawings she had of Hallstatt's market and other key landmarks which, she revealed, were due to be faithfully reproduced in China.

The Austrian authorities are still deciding how best to respond to the Chinese plans. The Unesco-affiliated monument conservation office, which looks after the village, said that while copying structures on the basis of photographs was legal, owners had to grant permission for their buildings to be measured. "The legal situation still needs to be examined," said spokesman Hans-Jörg Kaiser. Yet some of Hallstatt's residents admit they welcome the project because it gives the town publicity, which will attract more Chinese tourists. "We are happy they find it beautiful enough to copy," said Ingrid Janu, who runs a souvenir stall.

In China, however, the cloning of European towns and villages is not only highly popular but big business. The city of Chengdu is proud of its "British Town" completed in 2005, which is modelled on Dorchester.