I'd understand if they were demolishing decrepit buildings and building new and better buildings. That doesn't seem the case.
It's plausible that none of what we have learnt so far applies very well to extremely large populations. I still find it strange and super inefficient.
When it comes to efficiency in the real-estate market, efficiency is based on the highest and best use of the particular location. Ownership patterns and the regulatory processes for entitlement are the significant impediments to redevelopment of prime locations. These are less of an issue in China.
To some extent, the web is a useful analogy, we don't blink when a web property is redeveloped - a ten year old website is virtually untenable for commercial ventures. Real-estate is subject to similar forces to those which motivate Google to rewrite their search page.
It's plausible that none of what we have learnt so far applies very well to extremely large populations. I still find it strange and super inefficient.