China recently rolled out a package of policy measures to spur the renovations of villages in super-large and mega cities, which experts said will greatly improve local residents' living conditions and further contribute to high-quality urban development.

The renovation projects will also help catalyze effective investment, boost consumption and stabilize the property sector — key to buoying the real economy — in a bid to sustain the sound momentum of economic recovery and growth, they added.

In late July, the State Council Executive Meeting adopted a guideline on rebuilding villages in super-large and mega cities in a proactive yet prudent manner to improve people's well-being, expand domestic consumption and promote high-quality urban development.

The initiative was first put forward at a meeting of the Political Bureau of the Communist Party of China Central Committee that was presided over by President Xi Jinping, also general secretary of the Communist Party of China Central Committee, on April 28.

According to the criteria for classifying the size of cities issued by the State Council in 2014, those with a permanent urban population of more than 10 million are identified as mega cities, and those between 5 million and 10 million are categorized as super-large cities.

According to the Urban Construction Statistical Yearbook 2021, released by the Ministry of Housing and Urban-Rural Development in late 2022, China had eight mega cities by the end of 2021: Shanghai; Beijing; Chongqing; Tianjin; Guangzhou and Shenzhen, both in Guangdong province; Chengdu, Sichuan province; and Wuhan, Hubei province.

The nation also had 11 super-large cities, including Hangzhou in Zhejiang province, Dongguan in Guangdong, Zhengzhou in Henan province and Shenyang in Liaoning province.

In these cities, social governance and renovations of urban villages with hidden public safety hazards will be advanced in order to meet people's urgent needs. Localities should adhere to the principle of seeking progress while maintaining stability, according to the guideline.

Li Yujia, chief researcher at the residential policy research center of the Guangdong Planning Institute, said most urban villages are characterized by low-quality, chaotic living environments, high population density and spatial congestion, and public facilities in these places are generally inadequate and poorly maintained.

That said, many new urban residents, young people and migrant workers still choose to live in urban villages which, despite the aforementioned drawbacks, are able to meet their essential needs because they are cheaper places to live in. As renovation projects cover more public facilities and services in these urban villages, residents' living standards can be improved dramatically, Li said.

The guideline made it clear that village renovations will be carried out on a case-by-case basis and will be better aligned with government-subsidized housing to deliver concrete benefits to residents.

Yan Yuejin, director of the E-house China Research and Development Institution in Shanghai, said that China has put an end to the demolition and large-scale construction of buildings as part of urban renewal projects. Now, a steady, step-by-step approach will be adopted to tear down dilapidated houses, better harness the capabilities of existing facilities and build new ones in light of local needs.

The initiative will help address issues like fragmented spatial planning, inefficient land use and uneven development within super-large and mega cities, as well as facilitate high-quality and sustainable urban development in the long run, Yan said.

The renovation projects do not necessitate a massive expansion of investment from private property developers, and government support will inject more confidence into the real estate sector and anchor the market expectations of the developers, he added.

The guideline stressed the need to let the market play a decisive role in resource allocation and allow the government to better fulfill its responsibilities. Policy support will be beefed up in this regard, and innovative approaches will be explored. Private investment in the projects will be encouraged, and new types of businesses will be developed to ensure sound and sustained progress, according to the guideline.

The guideline noted that local governments will assume major responsibilities, including drafting renewal plans in a well-calibrated manner and raising funds through multiple channels to efficiently utilize land resources and meet the needs of various stakeholders.

Zhang Dawei, chief analyst at the Centaline Property Agency, said that renovating urban villages involves long development cycles and large capital input. Compared with State-owned enterprises, private businesses are in a weaker position to acquire loans from banks.

Currently, common problems such as interest disputes, coupled with high compensation given to building owners for demolition, could delay renovations and pose considerable challenges for the cash flow of private businesses, Zhang said, adding that more favorable policies should be rolled out to better mobilize private investment.

Special lending facilities, deeper tax breaks and other government support should be provided to facilitate the participation of private investors to expedite the village renovation projects, he added.

According to Sinolink Securities, the market size of urban village rebuilding programs across the nation stood at 1.24 trillion yuan ($172.4 billion) in 2020, 1.36 trillion yuan in 2021 and 655.9 billion yuan in 2022, and is expected to top 1 trillion yuan over the next three years with relevant policies kicking in.

Wen Bin, chief economist at China Minsheng Bank, said the transformation of urban villages will further promote the consumption of big-ticket items, including construction materials and home appliances, as well as the development of public service venues related to healthcare, express delivery and entertainment, among others.

With greater consumer spending and effective investment, the country will be better-positioned to sustain its sound momentum of economic recovery and growth, Wen said.