Xi’s comments were delivered at the Central Urban Work Conference — the first of its kind since 2015 — as he outlined a more measured path forward for China’s cities. “Urban development should now focus on improving existing homes,” read the official Xinhua summary, citing a need for comfort, convenience, and safety in urban living.

China’s past urban strategies, such as the 2015 shantytown redevelopment program that pumped over 3.2 trillion yuan ($446 billion) into the economy, prioritized massive residential construction. That approach is no longer sustainable amid demographic decline, falling home prices, and waning demand. A Goldman Sachs report predicts new housing demand will remain 75% below its 2017 peak for years to come.

In contrast, the new vision calls for high-quality upgrades, limiting extremely tall buildings, modernizing pipelines, and promoting the redevelopment of urban villages and dilapidated housing. The government has already pledged to renovate 1 million homes in aging urban areas.

Market Reaction Muted Amid Economic Concerns

While the conference was closely watched by investors, the policy tone fell short of expectations for aggressive stimulus. Following the announcement, shares in Chinese property developers fell by over 4% in Hong Kong, reversing gains made on speculation of more forceful support measures.

Analysts, including Morningstar’s Jeff Zhang, cautioned that such high-level meetings rarely result in immediate, detailed economic intervention. “Investors pinned too much hope to the meeting earlier and may sell the news now,” Zhang noted.

Housing remains a major drag on China’s economic recovery, with new-home prices falling at their fastest rate in eight months. Developer sales also remain deeply suppressed, with Bloomberg Intelligence estimating a 12% decline for top 100 developers this year.

Even as the leadership pushes for a more sustainable urban trajectory, the country faces mounting pressure to reignite confidence in one of its most critical sectors.