Urban fiscal issues stand at the core of urban regeneration. After decades of rapid urban expansion driven by new greenfield construction, China’s urbanisation has entered a new era characterised by slower spatial growth and a greater focus on quality, bringing massive latent demand for regeneration of ageing urban districts. As a flagship academic journal for urban planning scholarship, Urban Planning Forum has curated this unprecedented special feature on urban public finance supporting urban regeneration, aiming to explore mechanisms, models and pathways for fiscally sustainable urban renewal.

To this end, the journal editorial board invited ten distinguished scholars to contribute academic essays themed Fiscally Sustainable Urban Regeneration, hoping to deliver actionable insights and references for on-the-ground regeneration practice, and unite policymakers and practitioners in building a more sustainable and equitable urban development future.

Liu ZhiProfessor & Director, Peking University–Lincoln Institute Center for Urban Development and Land Policy

From the perspective of urban economic theory, an economically vibrant city ought to generate sufficient municipal fiscal revenue to sustain its operation and growth; failure to do so will lead to urban decline. Even cities with sound economic performance must deliver public services and support spatial development within their fiscal capacity to meet current and future operational demands. Urban construction undertaken without regard for fiscal constraints will render municipal finances unsustainable and push government debt to excessive levels. In practice, few local governments operate within balanced budgets. A primary root cause is that local authorities, facing soft constraints on debt financing, tend to over-rely on public investment to drive urban growth, a tendency that gives rise to inefficient or unproductive capital expenditure.

Urban regeneration initiatives across the country feature abundant project pipelines, massive capital outlays, rapid rollout and nationwide coverage, with megacities and super-large cities launching particularly large-scale schemes. Industry stakeholders focus heavily on exploring diverse financing channels, yet rigorous appraisal of the genuine necessity of each project is rarely conducted. For many urban village redevelopment projects, authorities seldom assess the severity of physical decay or design low-cost viable renewal measures tailored to local conditions. In reality, many urban villages in China boast sound building stock, complete basic public infrastructure including power, water supply, drainage, sewage treatment and paved roads, alongside effective community governance. These neighbourhoods are home to numerous hardworking new urban residents, lined with small retail businesses that generate thousands of local jobs. Such urban villages are vastly superior to slums I have observed in other developing economies including Brazil, Colombia, Mexico, South Africa, India, Bangladesh and Indonesia. Undeniably, China’s urban villages supply a large volume of affordable low-income housing and fulfil the fundamental social mandate of securing housing for all. When drafting strategic urban regeneration plans, planners must first pose a series of critical questions: Are residents living here comfortably and stably? Is the physical environment so dilapidated that it is uninhabitable? What specific community quality deficits require remediation? Will rents rise after upgrading? Will the original tenants still be the primary beneficiaries of the redevelopment project?

All these questions carry profound fiscal implications. Existing empirical research confirms that large-scale demolition and reconstruction of urban villages displaces original tenants to alternative informal settlements, disrupting their employment commutes and children’s schooling. Rising housing demand in remaining urban villages pushes up rental prices, imposing heavier living expenses on low-income households and indirectly increasing local governments’ fiscal burden of providing subsidised affordable housing. Higher village rents also lock out young migrant newcomers. The aggregate economic losses stemming from such displacement are substantial. China’s cities are ageing rapidly, and urban economic vitality relies not only on educated young talent but also on a broad cohort of young workers to sustain essential municipal services. Therefore, municipal governments in megacities and super-large cities cannot rely solely on fiscal housing subsidies to compete for talent; they must effectively safeguard low-income rental housing markets. Urban villages deliver affordable housing for vulnerable groups — why replace them with gated communities catering to high-income households with no need for government support? During periods of buoyant housing investment demand, high-end residential purchases generated substantial land transfer fees and tax revenue for local governments, fuelling urban economic prosperity. Today, however, housing investment demand has softened amid growing housing stock, exposing developers to heightened investment risks. Consider a scenario where local governments issue special-purpose bonds to fund primary land redevelopment and supporting infrastructure for an urban village, yet private developers decline to participate in secondary construction due to insufficient profit margins — this would create a crisis analogous to unfinished residential projects. Local governments could task state-owned real estate enterprises with delivering secondary development, yet this solution carries severe risks of bloating unsold housing inventory and expanding government debt.

The linkage between urban regeneration and municipal finance is indirect, latent and long-term. Urban planning practitioners must recognise this correlation and its attendant fiscal risks, and bear the responsibility of communicating these trade-offs to government decision-makers to prevent the delivery of wasteful, unproductive regeneration projects.

The 2024 State Council Government Work Report, released by the central government in March 2024, explicitly mandates measures to curb inefficient and unproductive investment. Reliable technical safeguards exist to mitigate this risk within urban regeneration workflows: rigorous feasibility study and official approval procedures. Urban regeneration projects require enormous capital input and frequently draw on public funds, necessitating comprehensive economic, fiscal and financial viability appraisal. Appraisal outcomes inform targeted project design optimisation, delivering credible scientific evidence for implementation decisions and ensuring all approved schemes deliver economic vitality, fiscal sustainability, financial viability, social acceptability and environmental resilience. The central government has long mandated feasibility studies as a core precondition for public investment project approval. The National Development and Reform Commission’s General Outline for Compiling Feasibility Study Reports of Government Investment Projects (2023 Edition) sets clear binding standards for such appraisal. I argue that urban regeneration has evolved into a primary pathway for China’s urban spatial development, and local governments should introduce binding regulations requiring rigorous feasibility studies for large-scale regeneration schemes, alongside strict, transparent external expert review panels to eliminate wasteful investment and avoid municipal fiscal deficits.