They use inertial plus GPS/BD locating, not radar targeting, for the endgame.  But DF21D is aimed for mobile targets,  radar/IR targeting at the end  is necessary.  Radar/IR targeting cannot function properly above very high temperatures, and these temperatures are essentially determined by the Mach numbers, nosecone shapes, materials, shielding, cooling, etc. ... of the warheads.  Reducing speed somewhat is a simple way to alleviate this temperature problem.  Of course, you don't want the speed reduced too low.

If the warhead releases thousands of tungsten-steel pellets raining down toward target, then the speed needs to be kept at a level that those pellets maintain high enough momentum which is derived from the high velocity, but are still hard enough without being burnt off or melt soft.  These two boundary conditions determines the lower and upper limit of the desirable terminal speed of the warhead.  This speed range is lower than the warhead re-entry speed.