By Venus Wu

HONG KONG (Reuters) - Hong Kong police on Wednesday arrested pro-democracy protesters, some of whom scrambled up a monument symbolizing the city's handover from British to Chinese rule, a day before Chinese President Xi Jinping is due to arrive for the celebrations.

Hong Kong marks the July 1, 1997, handover on Saturday, amid calls for democracy and fears of creeping influence of Communist Party leaders in Beijing undermining the "one country, two systems" formula under which it operates.

The city is under lockdown, with a massive security presence expected for Xi's arrival on Thursday.

About 30 protesters, including student protest leader Joshua Wong, gathered at the six-meter "Forever Blooming Golden Bauhinia" statue on the Wanchai waterside, a gift to Hong Kong from China, in front of the Chinese national flag and hundreds of perplexed Chinese tourists.

The sweet-smelling bauhinia is the official Hong Kong emblem.

They unfurled a black banner demanding full democracy for the city and the unconditional release of Nobel Peace Prize winning activist Liu Xiaobo, who was recently diagnosed with terminal liver cancer.

"Democracy now. Free Liu Xiaobo," the protesters shouted. "We do not want Xi Jinping. We want Liu Xiaobo."

Xi is due to arrive on Thursday afternoon and make a speech before joining celebrations to mark the handover on Saturday, when he will also swear in the city’s next leader, Carrie Lam. Police said the demonstrators, including Wong who helped lead the 2014 "Occupy" street protests that blocked key streets for 79 days, were arrested for causing a public nuisance.

"We want to tell Xi Jinping that Hong Kong's prosperity is just a facade," Wong shouted into a microphone as he sat at the foot of the statue. "When democracy is not in sight, we need to take action to confront this system."Before the visit of Xi Jinping, it is time to urge the Chinese president, a hardliner, to release Liu Xiaobo."

Four policemen carried Wong by all four limbs into a police van as he shouted: "Hong Kong people, don't give up. Protest on July 1!"

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Right next to the statue, staff were making preparations for the celebrations and lining up hundreds of chairs for guests to observe the flag-raising ceremony on Saturday.A couple of hundred Chinese tourists, gathered for the sunset flag-lowering ceremony, looked confused as they took photos of the protest before the area was cordoned off by the police.

Many asked each other, "Who is Liu Xiaobo?""It will be the 20th anniversary of the handover. Foreigners will be watching. This is not good for the image of Hong Kong," said a 58-year-old tourist from the southern Hainan province who gave her surname as Fu.

Tens of thousands are expected to join an annual pro-democracy demonstration on Saturday.

(This story has been refiled to amend first reference of Xi's arrival to Thursday in third paragraph.)

(Reporting by Venus Wu; Editing by Nick Macfie)