As a main rural initiative, village land shareholding cooperatives spearhead non-agricultural development in the interest of rural communities, and thus participate in urbanisation. Nanhai, Guangdong, is a case in illustration. The institution of land shareholding cooperatives gives rise to unique compartmentalised industrialisation and fragmented urbanisation in the context of high population density and small-area autonomous villages. Village cooperatives are mutated from economic corporations to welfare organisations, prompted by the collapse of village enterprises. Being averse to investment for long-term productivity, village cooperatives indulge in extracting short-term land rents solely. Extracting land economic rents created by urbanisation, village cooperatives generate environmental and social equality problems. High-density low-income countries, especially in Asia, are facing a great challenge as fierce competition for limited urban land resources without effective governance often results in an unfavourable form of urbanisation. Sustainable compact urbanisation needs to strike a balance between local autonomy and urban integrity.