Filling demand which doesn't exist? China has an impoverished farmer/rural class to the tune of 600,000,000 - 700,000,000 people, and it is incredibly difficult to transition from a rural pass to a city pass, from what I've read. Difficulty in transition, to me, implies that their is a much greater demand to move into cities than the government is willing to allow currently. Why make it hard if you're begging people to move in?
EDIT: I know little of China, I'm posing this question in earnest to learn more!
The demand doesn't exist because those people can't pay to live in a brand new sky scraper. From what I have seen those units are in the 10's to 100's of thousands of dollars. Way outside the budget of a rural Chinese person.
Getting official residency in a city requires applying and fulfilling whatever (rather arbitrary) requirements the local government imposes.
It's in their best interests to be picky about who they let in, so the bar is set very high; Usually you need (1) a local employer to sponsor you, or (2) bribe one of the right office employees.
Both of those are beyond the means of most rural peasants. Those who have the money to afford city life but not the right connections to get the right papers will move in anyways, technically illegally.
As long as you don't cross the wrong person and get caught, you can often survive that way for quite a long time.
Disclaimer: My Mandarin is awful, and I'm almost certainly glossing over a lot of details, but that's a rough summary of what I've seen.
You may not realise how many cities there are in China, and how many "towns" and "villages" have skyscrapers. Think about London, which is half a dozen different cities which all grew into each other.
There's a big demand to live "on the right side of the tracks". Everyone wants to live in the "city" part of the city, not the bit that was once zoned "village", with all China's discrimination against poor rural people, and it may still have a particularly incompetent and corrupt government. But people will get a lot less picky when they realise they actually have to pay back the loans.
EDIT: I know little of China, I'm posing this question in earnest to learn more!