On one side lies the Forbidden City. On the other is the house of the late Deng Xiaoping. All around are the lawns and flowers of a Beijing Olympic beautification park.

Between them, however, stands the home of a nut-seller who refuses to make way for the demolition of old Beijing.

Yu Pingju and her family have been selling roasted chestnuts, candied apricots and watermelon seeds from this shabby roadside store since late paramount leader Deng gave the go-ahead to launch a private enterprise some 30 years ago. One of the late reformist’s daughters even stops by every now and then to pick up a bag of peanuts.

She may soon have to shop elsewhere for snacks. The Western City district authorities have ordered the Yu family to leave their 'nail house' - a name given to properties whose owners refuse to allow the state hammer them down - by June 26. But the 14-member family says it will not go.

The Yu’s argue that they have the law on their side, but they are prepared for the worst. Notice was served on June 11 and the government is in a hurry with the Olympic Games less than two months off.

One family member said: “They call this the people’s Olympics. We are not opposed to the Olympics, but you can’t use this pretext to subvert people’s rights.”

Unlike their neighbours on both sides of the street, whose shops and homes have been razed to make way for lawns, granite benches and potted plants, the Yu’s own the title to their home. And they are turning to a new law that guarantees the rights of private property holders to protect them.

Ms Yu told The Times: “This is not only our home, but our only source of income. None of has health, unemployment or pension insurance. We have never asked the state for a job. We support ourselves and we want to continue to do so.”

This face-off between the little man and big government is evidence, she says, that local officials still prefer to use the power of central planning even in a market economy. “Deng Xiaoping opened the door to reform 30 years ago, but the lower level officials distort these policies.”

The family has turned to a veritable array of guardian angels. Above the store flutter three huge red national flags. Portraits of Chairman Mao, of Deng Xiaoping and of the Buddha now gaze down on the crowds gathering to see the hubbub. Today, the Yu family pasted up a picture of Premier Wen Jiabao, his popularity never higher since he flew out to direct earthquake relief operations. A huge banner overhead reads: “They want to force us to leave. But Premier Wen cares for the people.”

The district government is offering compensation of 346,660 yuan (£25,000) or the use of a shop a little further north that is now a privately-owned dumpling restaurant. They could probably get 925,000 yuan on the open market. One family member said: “It’s like exchanging gold for potatoes.” As for the dumpling restaurant, business is booming and they profess ignorance of the whole matter.

What the Yu family wants is proper compensation, and they have shown unflagging determination. It is two years since their neighbours’ homes disappeared to make way for a reconstruction of the old imperial wall and the lawns. It is three months since scores of police and officials descended on the store and tore down a 14 square-metre corner of the house they said was illegal. But the Yu’s will not budge. Ms Yu said: “They want to intimidate us. We just shot video of them and told them they had to pay if they damaged our rightful home.”

China’s most famous nail house owner held out for weeks, living on food carried up by pulley to his home that stood on a pillar of earth in the middle of a deep construction site.

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