New construction land rule seeks to curb urban sprawl

China is tightening the reins on urban expansion, moving toward a "one in, one out" land policy that prioritizes the revitalization of existing city spaces over the development of pristine land.

At a news conference held on Monday, officials from the Ministry of Natural Resources announced a strategic shift in how the world's second-largest economy manages its territory.

The new mandate dictates that a city's annual quota for new construction land must not exceed the amount of underutilized land it successfully repurposes.

Kong Weidong, director of the ministry's department of natural resource development and utilization, said the simple rule is that a city must revitalize one hectare before it can add one new hectare.

The policy marks a definitive end to the era of "spreading the pancake" — a Chinese term for relentless, low-density urban sprawl — as the country's urbanization transitions from a period of rapid growth to one of stabilization and quality enhancement.

With a population of 1.4 billion and limited arable land, China is treating its land as a finite strategic asset. Kong emphasized that the government is calculating "three sets of ledgers" consisting of market profit, national development, and public welfare.

Under the new guidelines, what little "new" land is made available will be strictly reserved for major infrastructure such as national-level energy, transportation, and water conservancy projects.

It will also be prioritized for "new quality productive forces" like modern industrial systems and high-tech manufacturing, as well as livelihood projects such as the transformation of "urban villages" and the construction of public service facilities.

Crucially, the ministry clarified that new construction land will, in principle, no longer be allocated for commercial real estate development. This move comes as China grapples with a persistent housing glut.

By the end of 2025, the area of commercial housing awaiting sale reached over 76.6 million square meters, marking the sixth consecutive year of increase. In 100 selected cities, it is estimated that it would take more than two years to clear existing inventory at current sales speeds.

However, officials were quick to note that this is not a "stop work" order for developers. Instead, the government is pushing the real estate sector toward quality over quantity.

Kong said this does not mean the government is stopping the supply of residential land, but rather focusing on "precision supply" from existing resources. The goal is to encourage developers to acquire high-quality land and build better housing in prime urban locations with established amenities, rather than building speculative high-rises on the city fringes.

To facilitate this transition, the central government is putting significant financial weight behind the plan. Last year, the Ministry of Natural Resources collaborated with the Ministry of Finance to guide local governments in issuing over 540 billion yuan ($78.3 billion) in special bonds.

These funds are specifically earmarked to buy back and store idle land, effectively cleaning up the balance sheets of stalled projects and prepping the land for more efficient use.