Borrowed time

Should China scrap its mandatory housing fund?


Huang Qifan: he has a bold idea

With China’s economy coming to a standstill as it struggles to contain the deadly coronavirus outbreak, smaller companies that lack a cash cushion are faltering. To help enterprises through these tough times, the central government announced that if an employer is unable to make its mandatory contributions to the housing provident fund on schedule, it will be allowed to postpone contributions for the time being.

The relief measure, however, has prompted some to argue that it is time to do away completely with the housing fund – a long-term housing savings plan made up of mandatory monthly deposits by both employers and employees.

Huang Qifan – former mayor of Chongqing; as well as the visionary behind Shanghai’s Pudong district; and China’s think-tanker-in-chief at present – is one of the proponents. Last week, he wrote an article that suggested the housing provident fund was obsolete. The fund was originally conceived in the early 1990s to help state employees – who no longer had government housing provided for them – save to buy their own home. However, Huang argues that China’s property market is now fully market-oriented and that commercial banks have become the main source of home loans, meaning the housing provident fund is of little significance. He reckons that abolishing it could cut social security costs for struggling enterprises by as much as 12%.

Not everyone is supportive. National Business Daily thinks Huang may have exaggerated the cost savings as, in practice, very few enterprises actually contribute the full amount. Moreover, it says that many small and medium-sized enterprises – i.e. the corporate grouping most vulnerable because of the economic impact of Covid-19 – are already exempted and so would not see their cost base reduced.

Separately, in an opinion piece on Phoenix News, two professors at Peking University also reckoned that doing away with the housing fund is a poor idea. “In fact, we argue that it [getting rid of the housing fund] is a lousy policy proposal,” Liu Qiao and Zhang Ye wrote. “Not only can it not lessen the burden on enterprises during this extremely difficult period, it also brings a series of negative impacts on the overall economy.” (See previous article for how city officials in Wuhan this month used its provident fund as a means to help frontline medical staff buy their first home.) 

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