BEIJING: China is mobilising an often overlooked pool of funds worth 10.9 trillion yuan (US$1.6 trillion) to boost a broad range of housing-related consumption, the country’s first policy response after its economic slowdown deepened in July.
Residents will be able to withdraw their savings in the housing provident fund, a government programme previously used to help people buy homes, for big-ticket spending including renovations, according to a revised law taking effect next month.
Regulators will also reduce strings attached for residents using savings from the fund on rent payments.
China will also allow the provident fund’s management centre to purchase policy bank bonds for the first time, in a move to increase its returns.
The revisions came after China’s economy showed across-the-board weakness in July, with consumption softening more than expected and home prices continuing to fall.
Many economists estimate that growth slipped further below the government’s annual target, sparking a call from Premier Li Qiang to ramp up supportive measures.
China’s provident fund system, which it adopted from Singapore about three decades ago, requires employees and employers to contribute monthly into a pool that can then give out mortgages, often at a lower interest rate than banks.
With contributions from almost 180 million employers and workers, the fund had 10.9 trillion yuan as of 2024, more than the outstanding amount of mortgage loans, according to the latest official data.
The latest revision also allows the State Council, or China’s cabinet, to solely decide lending rates on mortgage loans given out by the housing provident fund. — Bloomberg
