(Yicai Global) July 24 -- China will begin renovating the urban villages in its megacities to improve people's livelihoods, expand domestic demand, and promote high-quality urban development, according to new cabinet guidelines passed on July 21.

Industry insiders said the revamp will differ from the one involving shantytowns in third- and fourth-tier cities between 2015 and 2017. This time efforts will focus on super-large cities, without unnecessary demolition and reconstruction work, and the speed of investment will be slower and the economic gain will be more gradual.

Shantytowns were rebuilt across the country from 2008 to 2020, boosting effective investment and consumption of building materials, decoration, and home appliances, according to a research report by Citic Securities. It also improved the development of the upstream and downstream of related industries and played an active role in steadying economic growth, the report said.

The impact of the next renovation round on bolstering the real estate industry and infrastructure construction will be smaller than it was in about 2015, the report added.

“Most funds to improve weak links in public service facilities will be from policy-based financial instruments, special bonds, and financial rewards instead of subsidies through state-owned firms," said Li Yujia, chief researcher at Guangdong Housing Policy Research Center. 

An industry insider also noted that special bonds are limited, so it is necessary to bring in funds from more market players to promote development that relies on the amplification of leverage.

Massive stimulus in the property industry is probably not a solution to ensure economic development, according to China Industrial Securities International Financial Group. The sector will likely have a new development pattern in the long run, and the era of boosting the economy by stimulating the real estate market may be gone forever, it added.

Young people who just moved to cities and immigrants are mainly located in the megacities and  megalopolises, especially in their villages, industry insiders said. So the revamp of urban villages in such places will solve the unbalanced and inadequate development in cities and release consumption potential and domestic demand by offering full public services, they added.

China has six megacities -- Shanghai, Beijing, Shenzhen, Chongqing, Guangzhou, Chengdu, and Tianjin are megacities -- each with populations in excess of 10 million. Fourteen other cities, including Wuhan, Dongguan, Xi'an, Hangzhou, and Foshan, are megalopolises with populations of between 5 million and 10 million.

Urban villages were originally rural villages consumed by big cities as they grew, and migrants often take up residence in these neighborhoods because of the cheaper accommodation on offer.

Editor: Martin Kadiev