1/
On July 14, Xi Jinping chaired the Central Urban Work Conference—a once-in-a-decade meeting that sets China’s urbanization agenda.
Unlike the 2018–2020 shantytown boom that unleashed credit and drove growth, this meeting signals something different:
➡️ No "bazooka" stimulus.
➡️ Focus on absorbing excess capacity via urban renewal.
Bottom line: Xi's "urban renewal" is not stimulus in the old sense. It’s a managed capacity absorption strategy - channeling overbuilt sectors into controlled public works.
#China #Macro #UrbanPolicy
On July 14, Xi Jinping chaired the Central Urban Work Conference—a once-in-a-decade meeting that sets China’s urbanization agenda.
Unlike the 2018–2020 shantytown boom that unleashed credit and drove growth, this meeting signals something different:
➡️ No "bazooka" stimulus.
➡️ Focus on absorbing excess capacity via urban renewal.
Bottom line: Xi's "urban renewal" is not stimulus in the old sense. It’s a managed capacity absorption strategy - channeling overbuilt sectors into controlled public works.
#China #Macro #UrbanPolicy
2/
Xi's message: urbanization has entered a quality upgrade phase e.g. transformation of existing stock and aging urban piping & other systems.
Translation: redirect idle steel, cement, solar, EV, and construction capacity into controlled, rolling retrofit projects - not into speculative housing booms.
#China #Infrastructure #Investment
Xi's message: urbanization has entered a quality upgrade phase e.g. transformation of existing stock and aging urban piping & other systems.
Translation: redirect idle steel, cement, solar, EV, and construction capacity into controlled, rolling retrofit projects - not into speculative housing booms.
#China #Infrastructure #Investment
3/
Likely sectors that benefit:
📌Utilities and upstream suppliers
📌Green property developers
📌EV charging & transport
📌Smart city & digital governance
BUT: most of these already suffer from overcapacity and margin squeeze.
Likely sectors that benefit:
📌Utilities and upstream suppliers
📌Green property developers
📌EV charging & transport
📌Smart city & digital governance
BUT: most of these already suffer from overcapacity and margin squeeze.
4/
The exception? Data infrastructure and urban digital services, which still enjoy policy tailwinds and less price compression.
But for steel, cement, EVs, even green tech?
This is about survival, not profit.
Primary value lies in absorbing surplus - not creating new engines of growth.
#China #Overcapacity #SmartCity
The exception? Data infrastructure and urban digital services, which still enjoy policy tailwinds and less price compression.
But for steel, cement, EVs, even green tech?
This is about survival, not profit.
Primary value lies in absorbing surplus - not creating new engines of growth.
#China #Overcapacity #SmartCity
5/
Why it still matters: channeling surplus capacity into public upgrades can buffer employment, reduce safety risks, improve energy efficiency, and slow deflationary downdrafts. In a weak-demand economy, absorbing slack is value.
#ChinaEconomy
Why it still matters: channeling surplus capacity into public upgrades can buffer employment, reduce safety risks, improve energy efficiency, and slow deflationary downdrafts. In a weak-demand economy, absorbing slack is value.
#ChinaEconomy
6/ But there are serious trade-offs.
Near term effect: demand backstop, social goods, industrial utilization.
Long term risk: slow returns, diminishing macro impact, local debt strain, crowd-out of private firms, deflation if capacity persists.
#China #PolicyRisk
Near term effect: demand backstop, social goods, industrial utilization.
Long term risk: slow returns, diminishing macro impact, local debt strain, crowd-out of private firms, deflation if capacity persists.
#China #PolicyRisk
7/
Long-term implications:
Using infrastructure re novation to absorb overcapacity is a tactical workaround, not a structural fix.
➡️ Buys time, but doesn't change the system’s fundamentals.
➡️Offers a non-reflationary form of stimulus, but at the cost of deeper imbalances.
➡️May eventually require fiscal centralization or debt write-downs, as the return on these projects likely underwhelms.
Long-term implications:
Using infrastructure re novation to absorb overcapacity is a tactical workaround, not a structural fix.
➡️ Buys time, but doesn't change the system’s fundamentals.
➡️Offers a non-reflationary form of stimulus, but at the cost of deeper imbalances.
➡️May eventually require fiscal centralization or debt write-downs, as the return on these projects likely underwhelms.
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