This study explores how Hetian Second Street (HSS) in Urumqi, Xinjiang, exemplifies the governance of ethnic difference through �controlled diversity�. Based on forty days of ethnographic fieldwork, it analyses how Uyghur and Han actors navigate a hybrid commercial space where ethnic identity is visibly curated yet politically neutralised. It develops a tripartite framework: first, examining how visual ethnicity is selectively encoded through architecture and bodily aesthetics; second, how technical regulation filters ethnic presence via licensing and inspections; and third, how strategic co-performance enables actors to negotiate governance through mimicry and calibrated ambiguity. The study advances debates on authoritarian urbanism and the aesthetics of power, arguing that controlled diversity is not a static condition but a fragile, continually negotiated process shaped by state agendas, market forces, and everyday social practices.