Tailored Solutions

But normal work continued. At 5 pm, scooters flooded out of Zhongda Textile Market toward Kanglu’s myriad factories. Day workers waited on the roadside, hoping to seize the last few hours of the day to find a job.　

Kanglu is an informal name for an area of Guangzhou’s Haizhu District, with two interconnected urban villages, Kangle and Lujiang. Springing up around the enormous Zhongda textile cluster in the last three decades, now the villages have been swallowed by urbanization. A hub for cheap and fast garment making, Kanglu is a densely populated area of only 1.1 square kilometers. Residents live cheek-by-jowl in multi-story subdivided houses, where they may only have to walk minutes to find a job.　

Now the area is facing upheaval. Straddling a vital central traffic artery, it is slated for demolition and rebuilding, a project that will cost 30 billion yuan (US$4.1b) for an area of 110 hectares.　

Kanglu residents voted for the renewal plan in 2011, part of a province-wide urban village renovation scheme. But it was not until 2023 that Guangzhou accelerated the process, as it became increasingly urgent to improve the living environment, enhance public services and upgrade the textile industry. At the end of 2023, the first building was demolished in Kanglu. In July, construction started. The project is divided into four phases and is expected to take 10 years.　

The first two plots of land to be developed belong to the village collective. But when it comes to privately owned properties, where residential and commercial buildings are mixed, it will be more complicated.　

Owners and residents are already pushing back at compensation offers, which are lower due to declines in property prices as the economy slows and the government’s plan of building more public facilities. They feel they can still make much more money from the textile business and renting to workers and companies, and the compensation will not make up for these losses. Unlike before, demolition and compensation for the property no longer means immediate wealth. It is a problem likely to hold up urban village renewal in many areas.

The process finally began in 2023. Authorities gave the order to clear the tenants from the first two plots slated for demolition, involving a floor area of 83,200 square meters, 49 buildings and 379 tenants. Qin told NewsChina that a boss he knows paid 400,000 yuan (US$55,655) to rent a workshop for a year, but received notice of demolition a month later.　

Qin is not worried about his factory right now. “It’ll take them at least three years to get to my factory. It’s close to the road and there’s a row of village homes behind us. It will be very difficult to get the [villagers] to agree,” he said.　

Like in many other urban villages, reaching compensation in Kanglu is difficult. As it took so long to start, villagers believed the payment they would receive for each square meter of demolished property would be very high.　

But Jiang Hao, founder of Guangzhou Modern City Renewal Industry Development Center (GRID), which is involved in the planning for Kanglu, told NewsChina that compensation standards have changed.　

On May 17, local authorities revealed the compensation for Kanglu property demolition. It divides property built before 2010 and after, and between owners who have official registration and those who do not. If the property was built before 2010, with an ownership certificate, owners can get a new property of 3.5 times their floor area or 3.5 times the base area of their houses. Property owners who are not registered in the village get a different compensation package, depending on the size of their building, a mix of new space and cash if it is over 280 square meters. For buildings constructed after 2010 with no proof of ownership, only cash compensation is offered, at 12,500 yuan (US$1,739) per square meter for residential buildings and 6,000 yuan (US$835) per square meter for commercial buildings.　

Some residents are not satisfied. In previous transformation projects in Guangzhou, people got a new property with a floor area four times the size of the demolished house. In 2020, when homes in Panyu, another textile district of Guangzhou, were demolished, owners got 20,000 yuan (US$2,783) per square meter. People feel the huge gap though most still would prefer a new property, rather than money.　

A non-registered villager told NewsChina that his building is 656 square meters. Based on the 280-square-meter rule, he would be offered full ownership of a new residence of that size, another apartment of 150 square meters without full property rights, and 340,000 yuan (US$47,313) in cash. If he decides to take cash only, he would get 4.7 million yuan (US$654,029). It sounds like a lot, but it is only enough for a 30-40 percent down payment if he buys an apartment near the village.　

An official working on the project told NewsChina on condition of anonymity that “The time when one could get rich overnight through [demolition] in old village transformation has gone.” This is a trend that may be repeated nationwide.　

Villagers who rent property as their main income are worried. One told NewsChina that because Kanglu is so important for Guangzhou’s economy and is located in the central part of the city, he hopes he can get more compensation.

Guangzhou benefitted greatly from the trade established in the early phase of reform and opening-up from the late 1970s. Foreign investment flooded. Industrial clusters are common among Guangzhou’s urban villages.　

In Kanglu, garment production around Zhongda Textile Market is an important link in the city’s clothing industry. Both villagers and village collectives are clear about the huge value of the land they live on, and have higher expectations for demolition compensation, Li Yujia, chief researcher at the residential policy research center of the Guangdong Planning Institute, noted.

　

Despite its size, there are nearly 20,000 garment and accessory factories and over 100,000 people living and working in Kanglu, with workshops big and small scattered among buildings in which people also live.　

Most property-owning villagers have moved out, but not before expanding their homes, adding multiple stories, even up to eight or nine. A subdivided room of just eight square meters rents for between 400 -1,600 yuan (US$56- 223) a month, depending on the facilities and condition. Each floor has eight such rooms, which means a four-story house could earn the landlord 600,000 yuan (US$83,500) a year.　

These rooms are often further sublet by second or even third landlords, each adding their own cut. This is why rent is so expensive, yet there is still demand from workers who prioritize proximity to places of work. Besides renting their own houses, the villagers receive money through the profits of commercial property collectively owned and rented by the village.　

After the one-month public consultation period over the initial compensation offers, Haizhu District urban-rural development bureau said it has asked the authorities involved to improve the compensation plan in response to residents’ concerns, reported China Real Estate Business in July.　

Between February and June, although there were three rounds of consultations with the villagers on compensation, by the end of August, no progress was made.

When the Kanglu project was first mooted in 2011, residents of both villages agreed and started seeking potential partners. In 2018 the two villages combined voted for the renovation. In 2021, real estate company Hopson was appointed to develop the area. At the time, they would have expected high compensation offers, and to be able to rent out the new properties for more money.　

In June 2023, Haizhu District established an office to oversee the project, and finally began to push for progress. After the first demolitions at the end of 2023, plans and consent for construction were approved in early summer of 2024, and in July, construction started.　

The gap of more than a decade between agreeing to the project and its implementation has seen a huge change in the way urban villages are transformed. A decade ago, urban village transformation in Guangzhou was completely market-oriented and led by real estate companies focused only on short-term profit, like building as many commercial housing developments as they could. At that time, the real estate market was booming. Now, with more concerns over long-term regional development and public welfare, areas such as enhancing infrastructure, improving living conditions and enhancing industrial upgrading are prioritized.　

The old way was more efficient. Led by property developers, they offered much more attractive compensation. Reaching agreement was much easier. But Li Yujia pointed out that overreliance on property developers led to high levels of compensation for homeowners who held out, and raising overall costs. This became a hurdle when governments offered their own compensation standards.　

Then to ensure maximum profits, developers often ignored the agreed planning permissions, building bigger homes while disregarding the required public facilities they were supposed to build. Ultimately, the property companies dominated the renovation projects, Li Yujia said.　

The recession in the property market has put paid to this way of dealing with urban village renovation. Li Xiaojiang, former director of China Academy of Urban Planning & Design, said the previous demolition compensation system was smooth because there was sufficient demand in the real estate market. Even though the compensation was high, developers constructed more buildings to make up for the loss, and local authorities made more money through leasing the land. Now it is unclear who will be responsible for reconstruction after demolition, especially as now there are increased government requirements for infrastructure and affordable housing, Li Xiaojiang noted.　

In 2023, the central government emphasized several times the importance of promoting urban village renovation in big cities. In July that year, the State Council issued a guideline, emphasizing a people-centered approach to urban transformation, prioritizing improvements to residential environments. The government is to take the lead in leveraging market forces. The guideline also mentioned the need for industrial upgrades and the development of a proportion of affordable housing.　

Guangzhou put forward its 2021- 2035 plan for urban village transformation the same year, highlighting the role of government and encouraging State-owned companies to get involved. Starting from May 1, the city implemented a regulation on urban village transformation, the first regional regulation to put urban village transformation on a legal track. It also marks a fundamental change in the transformation model in big cities like Guangzhou, from short-term and real estate-oriented investment and development models to emphasizing long-term and comprehensive public welfare.　

Kanglu is subject to the new development regime. In May, Guangzhou published guidelines for transforming old villages, factories and towns, with detailed requirements for approved projects in terms of industrial development, infrastructure facilities and affordable housing.　

Li Yujia said that the transformation of Kanglu will not be easy. Even though the floor area ratio and affordable housing requirements are not as high as in the new model, the government hopes more room can be provided for long-term development of the city to boost industrial upgrading, with housing provided for migrant populations. It wants the real estate company to balance the books on the project. “The landing of a project is rather slow as a result,” Li Yujia noted.　

In March and April, Li Yujia joined local seminars on transformation. He told NewsChina that real estate developers are particularly concerned about maintaining equilibrium in cash flow during projects amid the decline in the property development market. The longer a project is delayed, the more financial pressure they are under. Local authorities are trying to persuade Kanglu villagers to accept the compensation to ensure the project continues.　

Several experts familiar with the project believe it will take time for villagers to lower their expectations, and this will be hard to push forward relying on the government alone. The market will make them truly feel the plummeting housing price.　

Kanglu property owners told NewsChina they are in favor of improving the general environment. They are not in danger of losing their primary residence, as most have moved out and are not involved in the textile business. But they still want to rent out the new properties to provide their income.　

It is a case of balancing the needs of individuals with the overall needs of the village and the wider city.　

For such industrial villages, just demolition and rebuilding might not necessarily solve problems like safety hazards and governance chaos if there is no strong management, according to Li Xiaojiang. He suggested the first two plots to be developed should become a pilot project. It will still take time for demolition in the area to spread.　

“It might be worthwhile to see how enterprises in the new buildings feel, and how well the property management is handling safety. If successful, it can be copied. But if there are still safety issues, for example, the local government should develop more effective renewal measures. In some areas, organic renewal, such as improving infrastructure, may be more appropriate,” Li Xiaojiang said.　

He added that Kanglu’s transformation is a matter of economic development. “Laws of the market should be respected while exploring a comprehensive method for the village that not only reduces risks and protects villagers’ legitimate interests, but also helps enterprises operate effectively and new residents settle down and prosper,” Li Xiaojiang said.