The three-day visit is his first since becoming leader in 2013 and comes at a time when there are growing fears that Beijing is threatening semi-autonomous Hong Kong's freedoms.
Leading pro-democracy campaigners including Joshua Wong were arrested yesterday night after staging a protest outside the convention centre that will host some of the anniversary events, a stone's throw away from the hotel where Xi will be staying.
Protesters are likely to be restricted to zones well away from the official celebrations.
Animosity towards Beijing has grown in recent years, particularly among young people.
The failure of mass rallies in 2014 to win democratic reform has sparked a new wave of "localist" activists, keen to emphasise Hong Kong's own identity, with some calling for a full split from the mainland.
Since the return to China in 1997, the city has been governed under a "one country, two systems" deal that gives it rights unseen on the mainland, including freedom of speech and an independent judiciary.
Chinese authorities and local officials insist Hong Kong's semi-autonomous status is intact, but have railed against calls for self-determination or independence.
Xi's visit will culminate in the inauguration of new city leader Carrie Lam.
She has promised to heal divisions but has already alarmed critics by saying children should be instilled with Chinese identity from a young age and suggesting that independence activists could face punishment under the law.
Lam was appointed by a pro-China committee although her main opponent, former finance secretary John Tsang, consistently topped opinion polls.
Since then, the debate on promised democratic reforms has stalled with Lam saying she is unsure the time is right to revisit it.
She has said she wants to focus on livelihood issues instead, in a city where the wealth gap is at a record high and many cannot afford decent housing, fuelling tensions.
Xi's trip will also include a visit to China's People's Liberation Army garrison in Hong Kong, which defends the city.
But the Hong Kong garrison has kept a very low profile in the past 20 years.
Xi is due to fly out of Hong Kong on Saturday, after Lam's inauguration.
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