This paper analyzes the role of local citizens in the morphological transformation of China's urban historic neighborhoods. With a focus on ordinary neighborhood properties, this research explores how local citizens have consumed different types of properties, and critically investigates socio-spatial problems that arise from such consumptions. By the case of the Stele Forest Neighborhood in Xi'an, the study argues that both the local state and local citizens recognize heritage resources as an important source of profit and that the competition for exchange values between the two has contributed to historic neighborhood physical patterns. Local citizens' resistance against and dissent from local government's conservation policies are manifested through passive bargains and tolerated illegalities, and are eventually reflected in their neighborhood morphological forms. Morphological pattern-related decision-making and subsequent actions in China's neoliberal urban setting are no longer monopolized by the local state, but shared by the local state and non-state actors.