The 10 trillion yuan public housing fund "sleeping"

Ask AI · Why has the housing provident fund system seen a flurry of reforms after 30 years?

“Since this year, more than 30 places nationwide have optimized policies related to the housing provident fund.”

** Written by / Ba Jiu Ling**

In the dead of night, Xiao Zhou was both scrolling through his housing provident fund account and studying the rules for using it. As a post-00s who works locally and doesn’t need to buy or rent a home, he hasn’t used this money. A few tens of thousands of yuan just sit there, while the annual interest is only a few dozen yuan.

Like many others, Xiao Zhou has begun to think about the housing provident fund, but he also has the same confusion as many: the housing provident fund is money in his own account—so why can’t he use it in everyday life except for buying a home? Why was the provident fund designed in the first place?

Let’s first turn our attention to the 1990s from the last century—the one Xiao Zhou hasn’t even been born yet.

A housing provident fund that isn’t very useful

In 1991, to align with the wave of housing commercialization, Shanghai drew on Singapore’s provident fund system and was the first to launch a pilot of China’s housing provident fund system, gradually expanding it nationwide. After years of incubation, in 1999 the State Council officially issued the Regulations on the Administration of Housing Provident Funds, marking the formal establishment of China’s housing provident fund system.

1991 Shanghai launched a pilot of the housing provident fund system | Image source: Ningbo Housing and Urban-Rural Development

The basic operating mechanism of this system is: each month, employees and their units both make contributions to the employees’ personal housing provident fund accounts. The amount an employee contributes = base × the employee’s housing provident fund contribution rate; the amount the unit contributes = base × the unit’s housing provident fund contribution rate. The base is the employee’s average monthly wage from the previous year, and the rates are 5%—12%.

This deposit accumulates over the long term and is used only when purchasing a home. The Housing Provident Fund Management Center will commission a bank to provide the homebuyer with a low-interest loan. From this, it is clear that China’s housing provident fund system is positioned as “housing security,” aiming to help Chinese residents—especially middle- and low-income households—build home-buying capacity through a “forced savings + low-interest loans” approach.

It is worth noting that this regulation was revised twice, in 2002 and 2019 respectively. As an administrative regulation, it has relatively high legal effectiveness and imposes strong institutional constraints nationwide. Therefore, to a large extent, it also determines what local provident fund policies can and cannot do.

That constraint is 27 years, and over those 27 years, things have changed dramatically.

In recent years, the real estate market has entered a stock/supply stage, and housing demand has gradually declined. At the same time, as people’s material living standards have improved, their expectations for the housing provident fund have shifted from a single focus on buying homes to more flexible and more diversified spending—for example, for consumption, paying mortgage and rent, supplementing retirement pensions, paying medical expenses, and more.

However, as a housing security system, although the “Regulations on the Administration of Housing Provident Funds” clearly state that the provident fund belongs to the individual’s property, it also stipulates that housing provident funds shall be used for employees to purchase, construct, rebuild, or conduct major repairs of owner-occupied housing, and must not be diverted for other uses.

Meanwhile, people used to work, consume, and buy homes mostly in their hometowns. But now, people move frequently between different cities, and demand for a “housing provident fund that moves with the person” has become increasingly urgent. However, the housing provident fund is managed by housing provident fund management centers set up by each province and autonomous region. They operate in closed systems and have inefficient allocation of funds between different regions—some regions have large amounts of funds lying idle, while others are already running short of funds.

The result is that for some people who work in big cities and contribute to the provident fund, after a few years they want to go back to buy a home, the procedures for withdrawal and transfer are cumbersome and the cross-city usage experience is not smooth.

The interest-rate advantage is also weakening. More than two decades ago, a provident fund interest rate of 4% was quite significant compared with commercial loan rates of 6%. Nowadays the difference between the two is no longer that large, and both fluctuate around 3%.

And as housing prices have surged, the loan amount provided by the housing provident fund has also become insufficient. Taking Shanghai and Beijing as examples: the price of an 80-square-meter home exceeds 4 million yuan, but the maximum first-home provident fund loan limit for individuals in the two places is only 1.2 million yuan.

Under multiple constraints, the housing provident fund has become a “lukewarm benefit” for many people. In 2024, China had 81.2704 million people withdraw housing provident funds, accounting for 46.10% of the number of people who actually made contributions. That means that in China, more than half of contributors contribute but never use.

Image source: Ministry of Finance of the People’s Republic of China

This large amount of provident fund locked away is also reflected directly in the balances: in 2016, China’s housing provident fund contribution balance was 4.56 trillion yuan; by the end of 2024, this number had increased to 10.92 trillion yuan.

Under all these factors, since this year, senior-level meetings have repeatedly mentioned reforms to the housing provident fund system.

At the end of 2025, the Central Economic Work Conference pointed out that the housing provident fund system reform should be deepened. This was the first time that the provident fund was singled out by name in conference readouts over the past decade. At this year’s Two Sessions, the Government Work Report states: “Lower the interest rate on individual housing provident fund loans” and “Deepen the reform of the housing provident fund system.” The provident fund was mentioned again in the Government Work Report after 11 years.

Intensive reform

Central guidance—local implementation.

So far, more than 30 places across the country have optimized policies related to the housing provident fund.

Overall, these policies share the following characteristics:

First, make the housing provident fund more useful; second, make the use of the housing provident fund more flexible; third, make it more effective when buying a home; fourth, make it more broadly beneficial to all.

◎ First, by bolstering the advantages of the housing provident fund, this is the area where reform efforts are most concentrated across localities, including raising the upper limit of provident fund loan amounts, lowering provident fund loan interest rates, supporting intergenerational mutual assistance with the provident fund, adjusting the recognition of the number of housing provident fund loan installments, extending the loan term for housing provident fund loans, and promoting “transfer from commercial to provident fund loans,” etc.

For example, Shanghai increased the maximum provident fund loan amount. After the adjustment, the upper limits for first-home and second-home loans reached 2.4 million yuan and 2.0 million yuan, respectively. In cases where additional conditions are met, they can be further increased by 35% to 3.24 million yuan;

For Fuzhou, for families with multiple children purchasing a second self-occupied home, the interest rate is executed according to the standard for first-home properties;

Taiyuan extended the term of housing provident fund loans, which must not exceed 30 years;

Deqing County in Changde allows homebuyers and their spouses to withdraw both parents’ and children’s account balances in accordance with regulations when the balance of the homebuyer’s and spouse’s housing provident fund accounts is insufficient, for the purpose of purchasing self-occupied housing……

Image source: Shanghai releases

◎ Second, to address issues such as declining demand for buying homes and provident fund use being too narrow, localities are working to broaden the channels for using the housing provident fund, shifting it from a single “home-purchase fund” step by step to cover a broader “residential consumption fund.”

For instance, Changchun supports withdrawing housing provident funds to subsidize property fees. If the housing is located within Changchun’s urban districts, the withdrawal amount per unit does not exceed 3,000 yuan per year. In addition, the housing provident fund can also be used to pay deed tax, fund the installation or updating of elevators, and more; Fuzhou supports using housing provident funds for renovating self-occupied housing and purchasing garages/spaces, etc.; Chengdu has clarified multiple uses of housing provident funds, such as purchasing parking spaces, withdrawals for major illnesses, and so on……

According to Xue Qinghe, president of Zhiben Society, analysis suggests that in the future, the scope of housing provident fund use will be further opened up, mainly covering livelihood-related uses such as renting, renovation, heating, retirement, unemployment, childbirth, education, and medical care. However, the uses of housing provident funds will not expand to everyday consumption, because that would deviate from the original intent of the housing provident fund system designed to secure housing.

Wei Yingjie, founder of the Glacier Think Tank, also believes that housing provident funds solve housing problems. If it deviates from this goal, it would lose the meaning of the system design. Therefore, regardless of whether it is feasible to extend provident funds to tourism and everyday consumption, based on the current situation, there are still many aspects of provident funds that can be improved around housing loans and meeting housing needs.

A steady stream of residents come to consult and handle business at housing provident fund service windows

In addition to redirecting housing provident funds toward “residential consumption,” there are also proposals to connect housing provident funds with retirement accounts.

As reported by Beijing News, trials in some cities could allow over-limit housing provident funds to be automatically transferred into retirement accounts, and provide differentiated investment options.

Zhang Bo, dean of the 58 Anju Ke Research Institute, expects that under the premise that individual housing needs have already been met, over the next 5 to 10 years, the proportion of funds in housing provident fund accounts allowed to be transferred into retirement accounts will most likely gradually increase to the 30%—50% range.

Xue Qinghe believes that at an appropriate time, housing provident funds could be merged into social security accounts, with the social security fund managing and allocating them in a unified manner. Financial commentator Liu Xiaobo said that this would be a good thing, but it would require policy support for tax relief……

However, Wei Yingjie reminds that this should be approached cautiously. He said that the housing provident fund is personal assets, and in practice it can be “withdrawn,” while personal pensions focus more on long-term investment and value growth, and the liquidity differences between the two are extremely large. After housing provident funds are transferred into retirement accounts, how they can be withdrawn in the future, and how to withdraw them (possibly involving individual income tax), need to be clearly defined. Therefore, when the reform plan is not mature, it should not be rolled out hastily.

Regarding issues such as insufficient flexibility in housing provident fund use, some regions have already simplified the processes for provident fund transfers and withdrawals. For example, Shanghai optimized the cross-region transfer and follow-up process: after employees change their work city, they can handle the transfer online and no longer need to run back and forth to service windows in two places.

Mobile housing provident fund mini program

Dong Yizhi, a lawyer at Shanghai Zhengce Law Firm, and Bai Xiangxia, a leading voice in opinions on Shanghai’s property market, both expect that a major expansion measure of housing provident fund reform is to promote cross-regional contributions, withdrawals, and loans, breaking the closed status of fund operations between provinces and cities. In the future, areas such as the Beijing-Tianjin-Hebei and the Yangtze River Delta urban clusters may first explore establishing a fund allocation mechanism to realize the basic principles of contributing in one place, using in another, and mutual support of funds.

Dong Yizhi also emphasized achieving the “housing provident fund moves with the person” via technology—through digital means, enabling nationwide data sharing, establishing a unified digital account, allowing cross-region business to be handled fully online, and enabling province-to-province services to be handled without having to travel, so that many real-world pain points can be addressed under the background of large-scale population mobility.

◎ Finally, it is necessary to mention the issue of broad-based fairness inherent in the housing provident fund system. There are enormous differences among different cities and different types of employers in terms of whether and how they contribute to the housing provident fund; for some occupations—such as flexible employment positions—there is no mechanism for paying into the housing provident fund.

Scroll up and down to view images | Image source: Yichai

Therefore, both Wei Yingjie and Liu Xiaobo remind that in future reforms, improving fairness in housing provident fund contributions is important, but we also need to consider employers’ operating costs. Private enterprise employees’ provident fund levels should be improved through fiscal subsidies; at the same time, for people in flexible employment who contribute to the provident fund, the principle of personal voluntariness should be fully upheld, and it is necessary to establish a “contribute anytime, withdraw anytime, with free exit” mechanism to alleviate the “worries” of this group.

Shenzhen has already given the choice to individuals. The “Measures for the Administration of Housing Provident Funds in Shenzhen,” released in March, makes it clear that in addition to the employer’s contribution ratio, employees may voluntarily increase their personal contribution ratio, up to no more than 12%; in addition, the new rules also clarify that flexible employment workers may contribute, withdraw, and use housing provident funds in accordance with regulations.

Image source: Shenzhen Housing and Construction Bureau

Conclusion

From “can it be used” to “is it good to use,” it’s clear that the journey of the housing provident fund has not been finished yet. But the endpoint is to activate and increase the dormant housing provident fund funds in China—now exceeding 10 trillion yuan—as soon as possible, so that it can play an efficient role.

Reference materials:

1. “The Central Government ‘Single-Names’ the Housing Provident Fund—What Signal Does It Send?”, People’s Daily, 2026.1

2. “Annual Report on Housing Provident Funds Nationwide in 2024,” Ministry of Housing and Urban-Rural Development, Ministry of Finance, and the People’s Bank of China, 2025.5

3. “Housing Provident Fund May Face Major Reform Moves,” 21st Century Business Herald, 2026.1

4. “Connecting ‘Housing and Pensions’—Can Housing Provident Fund Reform Learn from Singapore’s Experience?,” Beijing News Opinion, 2026.1

Author | Jiang Zihan | Editor-in-charge | He Mengfei

Editor-in-chief | He Mengfei | Image source | VCG, internet

Author statement: personal views are provided for reference only