China unlocks 10.9 trillion yuan housing provident fund to boost spending and support property
Macro
China is preparing to expand the use of its Housing Provident Fund, worth 10.9 trillion yuan, or about 1.6 trillion dollars, to stimulate housing-related consumption more broadly. This marks the first policy response after China's economy slowed more sharply in July. Under revised rules that take effect next month, people will be able to withdraw savings from the fund, which was originally focused on helping citizens buy homes, for more large housing-related expenses such as home improvements and repairs. Chinese authorities are also preparing to relax conditions for those who want to withdraw money from the fund to pay rent, in order to increase flexibility in using accumulated savings and help boost household purchasing power. The new rules also give China's State Council the authority to directly decide interest rates on housing provident fund mortgage loans. Analysts from China Index Holdings view this as opening the way for China to adjust interest rates more flexibly and as a modest positive for the property market. In addition to helping households and the property market, China is also allowing housing provident fund management centers to invest in policy bank bonds for the first time, in order to increase returns from the fund's asset management.
