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In recent years, home ownership has become a key item on the agenda of China's housing reforms. As a consequence of this policy direction, outlined in State Council decisions in 1994 and 1998, the issue of housing finance has gained prominence in the minds of prospective home-owners. Although the Chinese government urged state-owned banks in 1998 to expand mortgage lending, the main policy tool to enhance housing affordability for urban residents has been the Housing Provident Fund (HPF). This system was first introduced in Shanghai in 1991, soon followed by other cities, and was then propagated as national policy from 1994. Since the Housing Provident Fund1 system has been in force over ten years in Chinese cities, it seems appropriate to evaluate the progress and limitations of this policy. In addition, there have been few detailed studies on the functioning of the Housing Provident Fund. This article aims to remedy that shortcoming2.
The article begins with a study of income levels in urban China and it compares people's earnings with prices on the housing market. While Chinese statistics are problematic with regard to their accuracy and reliability, we can safely conclude that there is a gap between people's earnings and the money needed to buy an apartment. The second section traces the beginning and evolution of the Housing Provident Fund policy, and it explains its basic principles. As shown in this section, the policy aims of the HPF have shifted over time. While the initial focus lay on financing housing construction, in 1998 these policy loans were scaled down and were replaced by an emphasis on loans for households. The third section evaluates to what extent city-level HPFs have attained the goal to secure monetary contributions from enterprises and workers. It is shown that fund collection efforts have been relatively successful, but that implementation is uneven across regions and vis-à-vis different enterprises. Problems of fund collection are linked to legacies of the planned economy but are also due to obstacles arising from an economy in transition. The fourth section examines the usage of HPF funds with a special focus on individual housing loans. It shows that fund usage has been limited and that only a small share of the contributors has benefited from the...