The Housing Fund in China – What Investors Need to Know

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Chinese Housing FundBy Andrea Tonini

In China, the Housing Fund is a particular kind of social insurance that stands out from the other types of welfare, both in the way it is regulated and administered. Established in 1999, the fund allows Chinese employees to save money towards purchasing their own house, thus representing one of the means to ensure social security and stability in the country. As with other welfare schemes, the key points of the Housing Fund system are legislated at the national level – Regulations on Management of Housing Provident Fund. However, the regional governments have far reaching autonomy in regulating the Housing Fund in their own jurisdictions, which includes setting the contribution rates.

The Housing Fund and other social insurances

The welfare and social security system is regulated by the Ministry of Human Resources and Social Security (MOHRSS), which is also responsible for the national labor policy regulations. The MOHRSS regulates a welfare scheme consisting of Five Social Insurances: the maternity, medical, pension, work-related injury and unemployment insurances.

The Housing Fund is generally included when discussing the Chinese welfare system, even though the Housing Fund is administered separately, by the Ministry of Housing and Urban-Rural Development, and the local Housing Fund Bureaus. The main difference with the other social schemes is that the Housing Fund has no social pool, since the entire amount goes directly to employees’ personal Housing Fund accounts. Furthermore, the balance can only be withdrawn for down payment, purchase, construction and renovation of a house, or to subsequently pay back a mortgage. After an employee’s retirement, the remaining balance can be redeemed and used at will.


Just like the other social insurances, both employers and employees must make regular contributions into the Housing Fund. The employer has to contribute between 5 percent and 25 percent of the employee’s average monthly salary of the previous year (i.e. from 1 January to 31 December). The actual percentage differs per city or province. The employee generally has to deduct from his wage an equal contribution, although again, this may differ per city. The monthly premium is determined by the employee’s average wage in the previous year and the statutory contribution ratio. The statutory maximum contribution amount is calculated based on the average monthly wage in the city or province for the previous year.

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If the employer fails to make contributions to the employee’s Housing Fund account, the Housing Bureau will issue a reminder with a deadline for payment. If the employer does not make the corrections within the stipulated deadline, the Housing Fund Bureau will appeal to the People’s Court to enforce the order.  

In general, the employee is not liable for individual income tax on the Housing Fund contribution made by the employer. This changes if the contribution exceeds three times the average salary of the city or province. In that case, the amount in excess of that is subject to individual income tax.


Employer registration

Companies that are newly set up have to register at the local Housing Fund Bureau for the Housing Fund contribution within 30 days of their establishment. The documentation required includes the company’s business license, its enterprises code certificate and identity document of the Legal Representative. After the application has been approved, the company will receive a special account number for payments to the fund. Within 20 days of registration, the company has to bring the approved documents to an eligible bank, in order to automate Housing Fund contribution payments.

When new staff is hired, the employer needs to register them with the Housing Fund Bureau within 30 days from the date they start working. In some first-tier cities – such as Shanghai and Beijing – modification of staff details can be made online. However, companies established in other cities may need to send a member of the HR department to the local Housing Fund Bureau to manually update the employees’ information.

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If the employer fails in opening the employee’s Housing Fund account or does not complete the registration to enable the contribution to the account within the stipulated deadline, a fine between RMB 10,000 and RMB 50,000 will be imposed.

Employee withdrawal application

When the employee wants to withdraw the money from his personal Housing Fund, the employer has to verify the application and issue a withdrawal certificate. Thereafter, the employee submits the withdrawal application to the Housing Fund Bureau, which will approve or reject it within three days of submission. Local regulations vary widely on Housing Fund withdrawals however. 


The Housing Fund is a unique feature of the Chinese welfare system, allowing employees to save money to pay for and maintain their own accommodation. Recent reforms have made it possible to use the savings in the fund for other purposes as well, such as urgent medical treatment. However, the implementation of certain Housing Fund regulations has given rise to unrest in certain areas too. Recently, workers in Zhongshan and Dongguan protested against local regulations that make it more difficult to cash out from the Housing Fund after resigning from one’s job.

Employers should ensure to pay the Housing Fund percentage to their local employees, and carefully check what regulation is in effect in the cities where their businesses are set up. 


Asia Briefing Ltd. is a subsidiary of Dezan Shira & Associates. Dezan Shira is a specialist foreign direct investment practice, providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and financial review services to multinationals investing in China, Hong Kong, India, Vietnam, Singapore and the rest of ASEAN. For further information, please email or visit

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