The Zhitong Finance App learned that on May 6, the General Office of the Ministry of Finance and the General Office of the Ministry of Housing, Urban-Rural Development issued a notice to launch demonstration work on urban renewal. Urban renewal demonstration work is supported for prefecture-level cities and above. In 2024, each province (district, city) can recommend 1 city to participate in the evaluation. Fifteen model cities will be selected first, focusing on megacities and large cities along the Yangtze River Economic Belt. Central financial subsidy funds will focus on supporting urban underground pipe network renewal and “integrated factory network” construction and renovation of sewage networks.

Among them, the notice clarifies the central financial subsidy standards. The central government grants planned subsidies to model cities by region. Among them: the total subsidy for each city in the eastern region is no more than 800 million yuan, the total subsidy for each city in the central region is no more than 1 billion yuan, the total subsidy for each city in the western region is no more than 1.2 billion yuan, and the total subsidy for each city directly under the Central Government does not exceed 1.2 billion yuan. Funds are disbursed annually according to the progress of the work.

The direction of financial support. The model city raised funds through various channels, systematically promoted urban renewal actions, and promoted the construction of urban underground pipelines and integrated pipe galleries, construction and renovation of “factory network integration” sewage networks, repair shortcomings in municipal infrastructure, and renewal and renovation of old areas, etc., to optimize the spatial layout of the city and improve the city's functions.

According to information, the concept of urban renewal was first proposed at the Central Economic Work Conference in December 2019. In March 2021, urban renewal was incorporated into the 2021 government work report and the “14th Five-Year Plan” planning document, upgraded to a national-level strategy, and subsequently introduced a system of supporting policies to promote urban renewal throughout the country.

According to documents such as the “2021 Key Tasks for New Urbanization and Integrated Urban-Rural Development” of April 2021 and the “Notice on Preventing Major Demolition and Construction Issues in Implementing Urban Renewal Actions” in August 2021, urban renewal mainly promotes “three districts and one village” transformation with old neighborhoods, old factories, old neighborhoods, urban villages, etc. It is a kind of classification and careful disposal of existing buildings. The purpose is to strengthen repairs, focus on improving functionality, and enhance urban vitality.

Recently, Beijing, Chongqing, Guangzhou and other places have also introduced a new round of urban renewal related initiatives. Recently, the Beijing Municipal Housing, Urban-Rural Development Commission issued the “Beijing Urban Renewal Implementation Unit Coordinating Subject Determination Management Measures (Trial)”, “Beijing Urban Renewal Project Bank Management Measures (Trial)”, and “Administrative Measures of the Beijing Urban Renewal Expert Committee (Trial)”, which came into effect on May 10.

The Chongqing Municipal Housing, Urban-Rural Development Commission issued the “2024 Urban Drainage and Sewage Treatment Facility Construction Plan”, which will accelerate drainage facility construction and renovation projects this year. At the same time, in conjunction with special work such as urban renewal and upgrading, renovation of old neighborhoods, and urban village renovation, a number of drainage network renewal and renovation projects have been created.

The “Implementation Measures for the Renovation of Old Villages, Old Factories, and Old Towns in Guangzhou” were issued, clarifying the standards for the renovation of old villages, old factories, and old towns (hereinafter referred to as “the three old”), and providing legal guarantees for the orderly promotion of urban renewal actions and the achievement of “old city and new vitality”. It came into effect on May 15.

Zheshang Securities said that 2024 may usher in a new ten-year cycle of underground pipeline network renewal. The annual network renovation of 100,000 kilometers or more can bring new growth to the plastic pipeline industry. We can focus on listed companies that benefit from the underground pipeline network construction industry chain, including surveying companies in the early stages of construction, mid-stage pipe suppliers, and companies providing intelligent management in the later stages.

According to the Guoxin Securities Research Report, there is a difference between urban village renovation and old city renovation and monetization of shed reform. Focus on gradual renovation and minor updates to avoid major demolition and construction. Old neighborhood renovation projects are both public welfare and a certain degree of profitability. They are one of the most necessary and viable investment areas in the current situation where “money and other projects” have prominent contradictions and pressure on infrastructure investment to continue to grow. The potential market space for the renovation of old neighborhoods is about 1.6-2.4 trillion yuan, with an average investment of about 2100-270 billion yuan in 2022 to 2025, corresponding to a market space of 2-4 billion yuan that can drive planning design and construction inspection respectively.

Related concept stocks:

China Liansu (02128): The company is a leading engineering plastic pipe company in the country, and 60% of revenue is contributed by municipal engineering. Over the past 15 years, the length of urban municipal pipelines has basically maintained a compound increase over several years, and in the next 5 years, with the concentrated implementation of municipal projects and “daily reform” projects spawned by new urbanization, CICC believes that demand for engineering plastic pipes is expected to maintain steady growth.

China Construction International (03311): The company has carried out a number of urban village renovation projects in Shenzhen, Guangzhou, Shanghai, Changsha, etc. The renovation of existing old neighborhoods is a project that the company will focus on expanding for some time to come.

Lujing China Real Estate (00095): The company has more than 20 years of experience in old renovation, continues to cultivate the Greater Bay Area and Shenzhen markets, and has rich experience in old renovation. Zheshang Securities believes that the importance of the urban village renovation model is gradually increasing. The company is expected to benefit from the implementation of the urban village renovation policy, the old renovation project is expected to accelerate, and the company's years of old renovation experience can maintain competitiveness in expanding old renovation projects, and the company's land storage is expected to achieve high-quality growth.

Vanke Enterprise (02202): The company has participated in various types of project practices such as old city renovation and old neighborhood renovation in many cities across the country. Examples include the completion and delivery of the Shanghai Wan Innovation Institute in 2021, and the transformation from an old tire factory to a vibrant science and technology innovation park.

China Metallurgical (01618): In 2022, the company won the bid for the Xinhua District Urban Renewal Project (Northern Area) of the central urban renewal project in Cangzhou, Hebei Province, with a total investment of about 19 billion yuan and a contract amount of 11.97 billion yuan.

Yuexiu Real Estate (00123): On November 10, 2022, the “Implementation Plan for the Renewal and Renovation of Lirendong Village, Nancun Town, Panyu District” was approved by the Guangzhou Municipal Bureau of Housing and Urban-Rural Development. Yuexiu Real Estate will be responsible for this renovation work. The renovation project is estimated to take 6 years, with a total investment of about 21 billion yuan. It is the most invested old village renovation project in Panyu District of Guangzhou so far.