No easy solution to housing fund woes

In early October, the Ministry of Housing and Urban-Rural Development, the Ministry of Finance and the People's Bank of China rolled out a new policy initiative, signaling their strong support for the housing market. According to new rules, workers will be able to obtain housing provident fund loans in localities other than where they are employed.

This move was interpreted as good news for the housing market. However, it is still questionable whether the new policy will have any actual impact on the market over the near term. In my opinion, the effect of the policy is mostly psychological. It cannot fundamentally solve deep-seated problems with China's housing provident funds, so it remains to be seen what results it will yield.

First of all, since local provident fund management centers may be reluctant to see capital move beyond their grasp, it could take quite some time for a national network to be completely developed.

Second, the amended policy will do little to satisfy the demands of lower and middle-income earners. Housing provident loans are limited by a wage-earner's contribution to the fund. Since low income earners contribute relatively little, there is little they can get in return.