Inventory planning is the mainstream of China’s urban and rural planning in the future. However, during the implementation of inventory planning, demolition issues generally cause serious social contradictions, and lead to a great increase in the implementation cost of inventory planning. This paper takes the demolition of shantytowns in Qiaodong Jiedao, Taiyuan as an example, reviews the process of urban demolition from forced promotion by the government to reversed monopoly by the owners of demolished buildings, and points out that ambiguous connotation of public interest, lack of authority to define public interest, and unclear boundary between public interest protection and private interest protection are the important reasons leading to forced demolition and reversed monopoly. Meanwhile, requesting high compensation on grounds of the protection of right of habitation is also a major reason leading to reversed monopoly in the demolition of urban shantytowns. This paper proposes establishing a demolition legal system with balanced rights under the guidance of balance theory, that is, constantly improving laws concerning demolition from both the substantive and procedural aspects to make rights and obligations clear and balanced and to make procedure complete and fair on one hand, and formulating a soft legal system containing incentive clauses to encourage equal cooperation between multiple subjects and to complete demolition through market, on the other hand. Inventory planning is the mainstream of China’s urban and rural planning in the future. However, during the implementation of inventory planning, demolition issues generally cause serious social contradictions, and lead to a great increase in the implementation cost of inventory planning. This paper takes the demolition of shantytowns in Qiaodong Jiedao, Taiyuan as an example, reviews the process of urban demolition from the owners of demolished buildings, and points out that ambiguous connotation of public interest, lack of authority to define public interest, and unclear boundary between public interest protection and private interest protection are the important reasons leading to forced demolition of reversed the monopoly in the demolition of urban shantytowns. This paper proposes est ablishing a demolition legal system with balanced rights under the guidance of balance theory, that is, of rising improving laws concerning demolition from both the substantive and procedural aspects to make rights and obligations clear and balanced and to make procedure complete and fair on one hand, and formulating a soft legal system containing incentive clauses to encourage equal cooperation between multiple subjects and to complete demolition through markets, on the other hand.