AFTERNOON TEA: Folks gather at a teahouse in Taiziwan Park in Hangzhou, capital of east China's Zhejiang Province (JU HUANZONG)

At a teahouse in west Beijing, cigarette smoke and middle-aged men playing mahjong fill the rooms as the shells from sunflower seeds spill off the table and onto the floor. A man enters and lays down a tray of four cups and a teapot. Another man sits on a sofa reading a newspaper—he's sitting out this round.

The scene is a common one across the city and China, where tea drinking and teahouses have become synonymous with the Chinese way of life.

"People come here because they like the culture of drinking tea," says Lian Shichuan, who greets guests and serves drinks and snacks at the Baxiange Teahouse. "Few people come here to do business. They come here to be social, to play mahjong," a four-player tiled-based game popular in China.

But the teahouse—or chaguan—once so unrivaled and embedded in the national fabric here, could find itself scrambling for its own survival. From first-tier wealthy cities like Shanghai and Shenzhen down to the country's slower developing and poorer third-tier cities, cafés are sprouting up everywhere.

What does it all mean for the teahouse in China?

The coffee appeal

According to research by Mintel, a UK-based market research company, the number of cafés in China has risen to 31,783 in 2012, double the 15,898 in 2007. That's about 1,025 cafés for each of the Chinese mainland's 31 provinces and municipalities.

To be sure, there are more teahouses in the country with 50,984, but the number of teahouses has only risen by 4 percent from five years ago. If coffee houses are playing catch up, they're doing a good job.

"Café chains only really began to appear in China in the late 1990s, and have since grown very rapidly in number," Matthew Crabbe, Director of Asia-Pacific Research at Mintel, said in a company press release. "Meanwhile, the teahouse sector has struggled to find a response in terms of a successfully organized, branded, franchised chain—remaining focused on either tourists or low-spending older people looking for traditional places to relax and becoming less relevant to younger Chinese consumers."

Part of the appeal of a café for young people is the exclusivity it offers, as a place to spend money and be seen doing so, something not often possible in a teahouse where private rooms are the norm.

"Coffee is expensive. It's a luxury," Xu Shuyuan, a university English instructor in her 30s, said at a Costa Coffee shop in Beijing. "People like to sit here and feel good about themselves. They feel they are wealthy and can afford these expensive drinks."

Expensive they are. A regular black coffee runs in the $3 to $4 range or even higher compared to the $2 cost common in North America. Anything fancier could set you back double.

One chain looking to cash in on China's growing obsession with a cup of joe is Maan Coffee. Originally begun by a Korean expatriate in Beijing, the chain has 13 shops in the capital and over 40 across the country.

One two-story mammoth of a branch in central Beijing can seat over 300 people. Most customers are the young and the well dressed, a combination of students, urban professionals crowded around a laptop brainstorming the next big thing, and a few expats. The folks who come here are often referred to as xiaozi, loosely translated as yuppies.

"For now, most coffee drinkers are young people," said Jiao, the coffee shop's manager. "They take it as a foreign culture, like learning a foreign language like English."

The association that coffee has with Western culture is one reason why Zhou Cong, a municipal government employee, visits Maan on a routine basis.

Coffee is "like red wine. We can learn a lot: How to make it, where it's from," he said one afternoon sipping his cappuccino. "The same with coffee … we can see the wider world through it."