How to activate 100 trillion yuan in existing housing provident funds? Experts suggest: loosen withdrawal restrictions, or directly use them for down payments and mortgage repayments.

This article is from Times Weekly, by Fu Yibo.

Recently, many regions have announced new policies for the housing provident fund system. For example, Chengdu plans to temporarily remove the limit on the number of housing provident fund loans, increasing the loan amount for couples to 1.2 million yuan; Fuzhou has adjusted policies to allow withdrawals for home renovations, garage purchases, and other purposes.

As of the end of 2024, China’s housing provident fund deposit balance reached 10.925279 trillion yuan.

How can the 10 trillion yuan of existing funds be “brought to life”? At the Central Economic Work Conference held at the end of 2025, “deepening the reform of the housing provident fund system” was mentioned separately; in late December, the National Housing and Urban-Rural Development Work Conference was held, proposing to “better leverage the role of the housing provident fund” and “deepen the reform of the housing provident fund system.” The term “housing provident fund” was mentioned a total of 7 times at the conference.

This year, the government work report explicitly stated for the first time the need to “deepen the reform of the housing provident fund system.” This marks the first time in 10 years that housing fund reform has been included in the government work report.

Fu Weigang, Director of the Shanghai Financial and Legal Research Institute, told Times Weekly that with the current adjustment period in the real estate market, the over-10-trillion yuan stock of housing provident funds could play a greater role through systemic reform.

According to incomplete statistics by Times Weekly, since 2025, under the city-specific policy framework, over 280 policies have been optimized across various regions, covering the entire chain of deposits, loans, and withdrawals. As 2026 approaches, reform efforts are intensifying, with key cities like Shanghai, Tianjin, and Shenyang taking the lead to precisely meet residents’ urgent and improved housing needs.

Fu Weigang stated that many signs indicate that deepening the reform of the housing provident fund system is inevitable, driven by market changes.

Below is a dialogue between Times Weekly and Fu Weigang:

Times Weekly: What were the original reasons and objectives for establishing the housing provident fund system?

Fu Weigang: From a systemic perspective, it was originally introduced from Singapore. It was piloted in Shanghai in 1991, mainly to raise funds, or in other words, to enforce mandatory savings.

Tracing back, we find that the so-called central provident fund system established in Singapore in 1955 was for the same purpose. Initially, it was just a social security mandatory savings plan to provide retirement security for workers. Over time, the scope of the provident fund expanded to include pensions, medical care, housing, education, and investments, eventually evolving into a comprehensive social security system.

At that time, Singapore mandated that all citizens, regardless of occupation, who were employed, had to contribute about 20% of their salary to their personal provident fund account, while employers contributed about 16%. The contribution rate would gradually decrease after the individual turned over 50 years old. This policy provided huge funds for public construction and investment, strengthening Singapore’s financial capacity.

Therefore, in the context of poor housing conditions, high demand, but insufficient funds, Shanghai pioneered the pilot of the provident fund system. It involved individuals, enterprises, and the government each contributing part to raise funds for public housing, aiming to address the supply and demand mismatch in residents’ housing and to provide a substantial financial backing for local development.

By 1994, the State Council issued a document promoting the housing provident fund system nationwide: almost all urban units above county level, including government agencies, institutions, and state-owned enterprises, and their employees, were covered. In 1997, the provident fund was also included in the government work report, encouraging enterprises to actively supplement their provident funds and capital.

However, after the housing reform in 1998, China’s commercial housing market developed, commercial loans became more mature, and discussions about the use of the provident fund gradually emerged, exposing contradictions within the system.

Times Weekly: What are these “contradictions” specifically?

Fu Weigang: There are mainly two major contradictions.

First, the withdrawal and use of the provident fund versus its returns. The “Regulations on the Administration of Housing Provident Funds” state that the personal contributions of employees and the contributions made by their employers are owned by the employees. Theoretically, the provident fund is personal property and not owned by the fund management center. It’s like depositing money in a bank: the money in the account still belongs to the depositor, who can withdraw freely and earn interest. But in reality, individuals rarely enjoy the corresponding benefits directly.

In terms of usage, the biggest benefit of the provident fund is lower mortgage interest rates. Currently, the loan interest rate for the provident fund is about 2.1%-3%, while commercial loan rates vary by region, generally around 3%-4%. The interest rate gap isn’t large for most residents and doesn’t significantly influence their home purchasing decisions.

The second contradiction is the long-discussed issue that the “provident fund cannot solve the housing difficulties of the poor.” Of course, here “poor” is in quotes. But for some groups, housing provident fund is not about whether it’s cost-effective, but whether they need it.

For example, in Shanghai, a monthly income of around 10,000 yuan for a salaried worker means that without family support, they might not be able to buy a house in the short term, so they cannot utilize their provident fund. This results in their contributions being locked in the fund management center for a long time.

Thus, some feel that the original purpose of the provident fund was to help middle- and low-income groups buy homes. But in practice, most of the policy benefits have gone to middle- and high-income groups. I call this phenomenon a “reverse incentive” in distribution: high-income earners, with their stronger purchasing power, leverage the provident fund to enjoy low-interest loans; while those truly in need of housing support, unable to afford a home, see their funds remain locked in accounts, creating a cycle of “poor subsidizing the rich.”

Times Weekly: Is this the core reason for the current push for reform?

Fu Weigang: The housing provident fund system involves over 160 million depositors and a fund pool of over 10 trillion yuan, linked to local finances, affordable housing construction, and a vast management system—it’s a “systemic” issue.

In the past, due to the long upward cycle of the real estate market, the advantage of “low-interest leverage” of the provident fund was preserved.

But now, the external environment has changed fundamentally: the supply and demand relationship in real estate has shifted significantly, and commercial loan interest rates have decreased. When the “premium” of the provident fund over commercial loans shrinks, the attractiveness and problems of the fund are magnified.

Of course, directly abolishing the existing institutions would cause many issues. For example, what about the local provident fund centers? How should the contributions already made be handled? Over the past few years, various regions have introduced new policies, such as using the provident fund for rent payments, medical expenses, and even property management fees. Cross-regional transfer and withdrawal are also gradually being implemented and expanded.

All these issues have accumulated, pushing the provident fund system into the reform spotlight.

Times Weekly: Where do you think the key focus of future reforms will be?

Fu Weigang: We all know that the real estate market plays a very important role in the national economy; it has long been called a pillar industry. But in recent years, this market has changed.

For example, property prices are no longer soaring as before but are gradually stabilizing, leading to a decline in residents’ willingness to buy. Against this backdrop, the 10 trillion yuan of existing provident funds can play a significant role. How to better utilize this stock of funds is now a pressing issue.

In the past, reforms mainly involved “small tweaks,” focusing on improving withdrawal convenience. Now, the goal of deepening reform is shifting from “a supplementary home-buying tool” to “a revitalizer of stock assets” and “an internal demand accelerator.” First, activating liquidity: the 10 trillion yuan of idle funds is a huge “silent cost.” Relaxing withdrawal restrictions (such as for renovations, property fees, or even certain consumption expenses) can quickly convert into residents’ immediate purchasing power, creating a multiplier effect.

Second, addressing the asset-liability balance sheet. Under the backdrop of fluctuating household income expectations, the provident fund reform can serve as a “pressure release valve.” For example, allowing the provident fund to directly offset down payments or repay existing mortgages can effectively ease household cash flow pressures.

Third, aligning with new housing models. Another reform goal is to support “rent-to-own” policies. The current focus is no longer solely on supporting homeownership but also on using the provident fund to promote the construction of affordable rental housing, creating a closed-loop within the housing sector.