Summary of Key Points
The State Council has released the first national-level “15th Five-Year Plan” for urban renewal, outlining that during this period, at least 15 trillion yuan in investment (an average of 3 trillion yuan per year) is to be allocated for urban renewal projects. This includes specific objectives such as the renovation of dilapidated housing, the upgrading of old residential areas, and the construction of underground infrastructure networks. The funding sources are divided into three categories: fiscal, financial, and social capital, each with its own role. Additionally, measures such as special support from the central government, local special bonds, and REITs (Real Estate Investment Trusts) are being implemented to ensure the sustainability of the funding. All targets are determined based on a comprehensive assessment of the city’s conditions and the needs of its residents, with the aim of achieving “sustainable small profits.”
Detailed Analysis
#### 1. The 15th Five-Year Plan for Urban Renewal: 15 Trillion Yuan to Be Spent – What Exactly?
The total investment in urban renewal during the “15th Five-Year Plan” period is set at at least 15 trillion yuan, with an average annual expenditure of 3 trillion yuan, which is slightly higher than the figures for 2023 (2.6 trillion yuan) and 2024 (2.9 trillion yuan). The money will be used for five main areas:
- Housing: Renovation of 500,000 units of dilapidated housing in urban areas and 115,000 old residential complexes, with priority given to those that are over 20 years old. These complexes will first undergo a thorough assessment to identify issues such as water leaks and outdated facilities.
- Districts: Upgrading of 1,500 old neighborhoods and industrial areas, as well as 4,000 urban villages.
- Infrastructure Networks: Expansion of the underground infrastructure network by 365,000 kilometers, with an additional 770,000 kilometers to be built (200,000 kilometers for gas, 175,000 kilometers for drainage, 175,000 kilometers for water supply, 100,000 kilometers for sewage, and 120,000 kilometers for heating).
The renovation of the infrastructure network has a significant multiplier effect; for every 1 yuan invested, it can generate 1.5 to 2 yuan in related industries (such as construction materials and services), making it more effective in stimulating the economy compared to traditional infrastructure projects.
#### 2. Where Does the Money Come From? Three Types of Funds with Different Roles
The plan specifies three sources of funding, each with a different function:
- Fiscal Funds: These funds serve both as a safety net and a catalyst for public welfare projects (such as the renovation of old residential complexes). They also act as seed capital, attracting additional investment from financial institutions (for example, if the government provides 20% of the funding, it can leverage 80% from financial institutions).
- Financial Funds: These funds help to extend the repayment period for urban renewal projects, which often have slow returns (e.g., the renovation of infrastructure networks may take up to 10 years to generate profits). By extending the repayment period, financial funds enable the project’s future earnings to cover the costs.
- Social Capital: Investors such as developers and operators can participate in these projects and recoup their investment through subsequent operations, such as managing commercial facilities or leasing out industrial spaces within the renovated areas.
#### 3. What About Fiscal Support? Both Central and Local Governments Are Involved
- Central Government: In 2026, 15 cities, including Changchun, Wuxi, and Shenzhen, will receive special subsidies from the central government. This is the third year of such support; in the previous two years, more than 20 cities (including Beijing and Shanghai) received funding totaling over 20 billion yuan.
- Local Special Bonds: In 2025, local governments issued 350 billion yuan in special bonds for urban renewal projects, accounting for 7.6% of the total new special bonds issued that year. However, these bonds cannot be used indiscriminately. For public welfare projects (such as infrastructure network renovation) that do not generate profits, they must be used as part of the capital (about 20%) or combined with profit-generating projects (e.g., adding commercial buildings next to old residential complexes) to balance the cash flow.
#### 4. How to Attract Social Capital? Solving the Issues of Risk and Exit
To encourage social capital participation, the plan addresses two key concerns:
- Risk Reduction: Legal contracts are used to ensure that all parties fulfill their obligations, clarifying responsibilities and profit-sharing arrangements to reduce uncertainties.
- Facilitating Exit: Projects that meet certain criteria will be encouraged to issue REITs or asset-backed securities, allowing social capital to liquidate their investments by selling shares.
#### 5. The Goals Are Not Arbitrarily Set: They Are Based on Resident Needs and Urban Assessments
All renewal targets are determined through careful planning. For example, before renovating old residential complexes, a thorough assessment is conducted to evaluate the existing facilities (water supply, electricity, elevators, green spaces, etc.) and consider the residents’ needs (such as the desire for additional elevators or parking lots). The vice president of the China Academy of Urban Planning and Design stated, “The targets are set based on these assessments and surveys to meet the real needs of the residents.”
By adopting this approach, urban renewal not only improves living conditions but also drives economic growth and attracts social capital participation, achieving the goal of benefiting residents while ensuring sustainability.