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 cities have announced new policies for the housing provident fund system. 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 “activated”? 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 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 real estate market in a period of adjustment, 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 we move into 2026, reform efforts continue to intensify, 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 now 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 goals for establishing the housing provident fund system?

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

Tracing back, we find that in 1955, Singapore established its so-called Central Provident Fund system for similar reasons. 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 rates would gradually decrease after the individual turned over 50. This policy provided huge funds for public construction and investment, strengthening Singapore’s financial capacity.

In the context of poor housing conditions, high demand, but insufficient funds, Shanghai was the first to pilot the provident fund system, with contributions from individuals, enterprises, and the government to raise dedicated housing funds. The goal was to address the supply and demand mismatch in residents’ housing and to provide a foundational financial backing for local development.

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

Times Weekly: What are these “contradictions” specifically?

Fu Weigang: There are mainly two major contradictions.

First, the usage and benefits of the provident fund withdrawals. 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, not owned by the fund management center. It’s like depositing money in a bank: the money in your account still belongs to you, and you can withdraw it freely and earn interest. But in reality, individuals often cannot directly enjoy these benefits.

In terms of usage, the biggest benefit of the provident fund is lower mortgage interest rates. Currently, the loan interest rate for the 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 decision to buy a house.

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 isn’t 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, without family support, might not be enough to buy a house in the short term, so they cannot utilize their provident fund. This means that the deducted funds are accumulating in the fund management center month after month.

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 go to middle- and high-income groups. I call this phenomenon a “reverse incentive” in distribution: high-income earners, with their purchasing power, leverage the low-interest loans, while those truly in need of housing security—low-income groups—are unable to buy, and their funds remain locked in accounts, creating a cycle of “subsidizing the rich.”

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

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

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

But now, the external environment has changed fundamentally: the supply-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 happens to the local provident fund centers? How should the contributions we’ve already paid be handled? Over the past few years, various regions have introduced new policies, such as using the fund for rent payments, medical expenses, or even property fees, and cross-regional transfer and withdrawal are 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 real estate 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 has become 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 stock asset revitalizer” and “an internal demand accelerator.” First, to activate 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, to address the asset-liability balance. Under the background of fluctuating household income expectations, the 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, to connect with new housing models. Another reform goal is to support “rent and buy” coexistence. The current focus is no longer solely on supporting homeownership but on using the provident fund to promote the construction of affordable rental housing, creating a closed-loop within the housing sector.