China is turning to its housing provident fund, a government-managed savings pool worth 10.9 trillion yuan (about $1.5 trillion), to support its struggling housing market.
This fund offers an alternative to traditional bank mortgages and has become a key source of home financing as banks grow more cautious amid profit pressures. Last year, the fund’s outstanding mortgage loans reached 8.1 trillion yuan, surpassing bank lending in this area.
The housing provident fund operates through mandatory monthly contributions from employees and employers. It provides mortgages at lower interest rates than banks, making home loans more affordable. Recently, the central bank cut interest rates on these mortgages, reducing borrowing costs by 0.9 percentage points compared to bank loans.
This move is part of broader government efforts to stabilize the property market, which has faced persistent challenges and slowed growth.
In Beijing, for example, the fund financed 33% of residential mortgages last year, up from 29.4% in 2020. Though the rate cut offers some relief, experts say it is unlikely to trigger a sharp rebound in home sales without further policy implementation and economic improvement.
The provident fund’s growing role comes as banks face shrinking profit margins and rising bad debts. Unlike banks, the fund has ample resources to lend more aggressively, supported by contributions from nearly 180 million workers and employers nationwide.
China’s leadership, including President Xi Jinping, has pledged to revive the property sector and shield the economy from external shocks, such as recent trade tensions with the U.S. The housing provident fund is a frontline policy tool in these efforts, helping to ease mortgage burdens and maintain market stability.
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