(4) National debt: As per Regulations on Management of Housing Provident Fund, a housing provident fund management center, with the approval of the housing provident fund management committee in a city comprising subordinate districts, is entitled to use the housing provident fund to buy national debt on the premise of ensured withdrawal and loan oriented use as a priority. The year-end balance of the national debt registered 4.277 billion yuan, down 609 million yuan from the end of the previous year.

   3. Service Revenues and Expenses, and Value-Added Proceeds

    (1) Service Revenues: The annual housing provident fund service revenues totaled 159.836 billion yuan, up 6.79% from the previous year, comprising the deposit interest income of 38.823 billion yuan, the commissioned loan interest income of 120.212 billion yuan, the national debt interest income of 209 million yuan and miscellaneous income (such as interests on past due loans, and fines due to failure to make housing provident fund payment by the due date) of 592 million yuan.

    (2) Service expenses: The annual housing provident fund service expenses totaled 52.334 billion yuan, down 36.16% from the previous year, comprising the interest payment of 43.429 billion yuan to paying employees, the collection fee of 2.124 billion yuan, the loan service commission expense of 5.064 billion yuan and miscellaneous expenses (such as expenses for interest discount on loans, guarantee fees) of 1.717 billion yuan.

    (3) Value-added proceeds: Housing provident fund value-added proceeds results from subtraction of the housing provident fund service expenses from the housing provident fund service income. The annual value-added proceeds totaled 107.502 billion yuan, up 58.79% from the previous year.

(4) Allocation of value-added proceeds: Housing provident fund value-added proceeds, as per Regulations on Management of Housing Provident Fund, shall be used to establish risk reserve funds for housing provident fund loans, and as administrative expenses of the housing provident fund management center and supplemental funds for constructing urban public rental housing (low-rent housing). Risk reserve funds is established for ratification at a rate not lower than 60% of the housing provident fund value-added proceeds, or not lower than 1% of the annual housing provident fund loan balance. As required, a city embarking on a security housing oriented hpf pilot project should withdraw an accrued loan risk reserve fund tantamount to 4% of the year-end project loan balance.

The annual apportionment of the housing provident fund loan risk reserve funds recorded 33.92 billion yuan, the administrative expenses 10.724 billion yuan, and the supplemental funds for constructing urban public rental housing (low-rent housing) 61.808 billion yuan. The year’s value-added proceeds pending distribution recorded 1.05 billion yuan. As of the end of the year, the cumulative withdrawal of hpf loan risk reserve fund reached 126.164 billion yuan, and the cumulative withdrawal of supplemental funds for constructing urban public rental housing (low-rent housing) 180.454 billion yuan.

    (5) Disbursement of administrative expenses: Administrative expenses are the expenses disbursed by provident fund centers in various regions to ensure housing provident fund management and operation in accordance with the regulations, and are comprised of personnel expenditure, public expenditure and special expenditure. The disbursement of the annual administrative expenses recorded 8.009 billion yuan, up 12.83% from the previous year, with personnel expenditure at 3.566 billion yuan, public expenditure 1.14 billion yuan and special expenditure 3.303 billion yuan, accounting for 44.53%, 14.23% and 41.24% respectively, indicating a per capita increase of 13.72%, -4.51% and -0.25% respectively.

   4. Asset Risks

   (1) Personal Home Loans: The default mortgage loans recorded 404 million yuan, with a delinquency rate of 0.01%,  approximately at the same level as the end of the previous year. The annual use of the personal home loan risk reserve fund for stagnant or bad debt write-off registered 97 million yuan. The year-end home loan risk reserve fund balance was 124.012 billion yuan, accounting for 3.77% of the personal home loan balance. The percentage of the default mortgage home loan amount to the personal home loan risk reserve fund balance was 0.33%.

    (2) Pilot Project Loans: The default pilot project loans recorded 238 million yuan, with a delinquency rate of 0.77%. No project loan risk reserve fund was used for stagnant or bad debt write-off in the year. The year-end project loan risk reserve fund balance recorded 1.937 billion yuan, accounting for 6.24% of the pilot project loan balance. The percentage of the default project loan amount to the project loan risk reserve fund balance was 12.29%.

   (3) Risk Assets Left Over by History: Risk Assets Left Over by History refers to the uncollectible overdue receivables of housing provident fund principals and interests in the occurrence of project loans, national debt purchase, or unauthorized misappropriation or diversion by certain local governments as a result of the deficiency of the system and management in the initial stage of the housing provident fund system development.

   Annual collections of risk assets left over by history recorded 531 million yuan. As of end of 2015, the nation’s housing provident fund risk assets left over by history amounted to 193 million yuan. including 38 million yuan worth of left-over past-due project loans and misappropriated/diverted fund, and 155 million yuan worth of left-over overdue national debt.

Table 4: A List of Risk Assets Left over by History (unit: 10,000 yuan)

   In terms of income levels, low-income employees accounted for 49.81%, medium level income employees 44.12%, and high level income employees 6.07%[5].

Chart 5: Proportion of Paying Employees by Income Level

    (2)Efforts were made to bolster employees’housing consumption so as to alleviate their housing cost burden. The annual housing consumption oriented withdrawal amounted to 912.29 billion yuan, accounting for 62.70% of the annual payment amount and 83.03% of the annual withdrawal amount, up 4.18 and 7.66 percentage points respectively from the previous year, comprising 46.57% for purchase, construction, rebuilding and major overhaul of homes, 43.67% for repayment of home purchase loans, 3.66% for rental housing, 6.10% for miscellaneous(such as withdrawal due to property service charges payment).

Chart 6: Proportion of Withdrawals

   Home loans issued in the year recorded 1.108263 trillion yuan, with an average housing provident fund loan worth 354,600 yuan, up 58,300 yuan from the previous year. Of these loanees, low-incomers accounted for 36.61%, medium level incomers 57.43%, and high level incomers 5.96%.  The interest rates for the housing provident fund home loans issued for the term of five or less than five years and the term of over five years were 2 and 1.65 percentage points lower than the respective benchmark interest rates on commercial bank loans, resulting in a saving of the home purchase loans applicants’ interest expenses by 209.792 billion yuan, namely, a saving of interest expenses by 67,100 yuan for each family.

Chart 7: Proportion of Loanees by Income Level

    (3) Surplus fund was unleashed to boost steady and healthy development of the property market. Annual housing consumption oriented withdrawals and home lending amounted to 2.020553 trillion yuan, shoring up employees’ purchase and construction of homes with a total area of approximately 340 million square meters, namely, about one third of the annual transactions of commercial residential quarters in terms of areas, comprising 31.68% for homes 90 or less than 90 square meters, 58.30% for homes between 90 and 144 (incl.) square meters, and 10.02% for homes over 144 square meters. Newly built homes accounted for 75.67%, and second-hand homes 24.33%. The year-end home loan market share reached 22.7% [8], up 3.48 percentage points from the previous year. The percentage of the sum of annual home loan amount, project loan amount and housing consumption oriented withdrawal amount to annual payment amount was 139.32%.

Chart 8: Proportion of Purchased Homes by Area & Type

   (4) Measures were taken to bolster security housing construction in a bid to expand social benefit of housing provident fund.Housing provident fund loans, covering 42.67% of the total investment of the projects, were issued for 369 security housing projects, to benefit about 1.1 million needy families for housing solution, with a total area of 69.8579 million square meters. comprising 21.152 million square meters for 121 affordable housing projects, 28.843 million square meters for 133 relocation housing projects for shanty town area’s reconstruction, and 19.8629 square meters for 115 public rental housing projects.

     6. Other Major Issues

   (1) Went all out to push ahead with amendment of the Regulations.MOHURD expedited amendment of the Regulations in alignment with the deployment and direction of the central government, and submitted the amended Regulations to the State Council for review prior to the end of September. The amended Regulations (draft version) laid a foundation for safeguarding paying employees’ legitimate rights and interests, with the aim to better support paying employees for housing solutions, and improve the housing provident fund system with regard to such ten aspects as enaction of policies for standardized payment, streamlining of decision-making mechanism, standardizing organizational structure, relaxing eligibility criteria for housing provident fund withdrawal, maintaining and increasing liquidity of the fund, advancing development for preserving and growing value of housing provident fund, enhancing security for prevention of risks, upgrading service standards, enhancing supervision and inspection and improving law enforcement measures. In November, the legislative affairs office of the State Council carried out a public opinion polling to gauge the overall strength of support for the draft version of the amended Regulations for review.

    (2) Adjusted policies for housing provident fund withdrawal and use.Closing in on the overall objectives of ensuring growth, promoting reform, making structural adjustment and improving people’s well-being, MOHURD, MOF and PBOC issued five official documents for implementation of pertinent policies, including Notice on Easing Criteria on Rent Oriented HPF Withdrawal, Notice on Relevant Issues Concerning Personal Home Loan Policies, Notice on Adjustments to Down Payment Levels for housing provident fund home purchase loans, Notice on Operational Issues Regarding Nonlocal Housing Provident Fund Home loans, and Notice on on Practically Increasing HPF Use Efficiency, to raise limit for rent payment oriented withdrawals, reduce the down payment required for loans for purchase of first homes and second-hand homes, comprehensively promote offsite lending (i.e. hpf lending in a city other than an employee’s workplace location for home purchase of the said employee), and appropriately raise the loan caps. MOHURD convened four nationwide teleconferences, emphasized on adequate and good use of housing provident fund, and organized and conducted ad-hoc inspections. Greater efforts were made in various regions to expedite unleashing the surplus fund, so that fund use efficiency was greatly improved in a move to make a positive contribution to stabilizing the housing market.

  (3) Lowered the interest rates on home loans: PBOC cut interest rates on RMB deposits and loans five times, on March 1, May 11, June 28, August 26 and October 24, respectively. The interest rates on housing provident fund deposits were changed accordingly. The interest rates on housing provident fund loans were lowered four times, and yet for the fifth adjustment they remained unchanged. Following the adjustment effective as of October 24, deposit interest rate for personal housing provident fund collected in the fiscal year was 0.35%, and deposit interest rate for personal housing provident fund balance carried forward from previous fiscal year turned to be 1.10%. The interest rate on housing provident fund home loans for five years or below was 2.75%, and the interest rate on housing provident fund home loans over 5 years was 3.25%. The successive hpf loan interest rate cuts resulted in reduction of the cost for the paying employee’ buying a home and thus boosted housing consumption of paying employees.

    (4) Raised interest rates on savings of personal accounts.To improve the housing provident fund system and safeguard paying employees’ rights and interests, PBOC and MOHURD submitted to the State Council the Request for Bettering HPF Personal Account Deposit Interest Rate Formation Mechanism in December of 2015. In February 2016, Notice of the People’s Bank of China, Ministry of Housing & Urban-Rural Development and Ministry of Finance on Bettering Housing Provident Fund Personal Account Deposit Interest Rate Formation Mechanism (BI No. 43-2016) was released after approval by the State Council, with adjustments made to housing provident fund personal account deposit interest rate(s), so that the current collection time based dual rates, tantamount to the prevailing demand deposit rate and three-month time deposit benchmark rate respectively, shall be replaced as of 21 February 2016 by the unified rate equivalent to the prevailing one-year time deposit benchmark rate for interest calculation. The adjustment resulted in a 0.4 percentage point increase in the average interest rate on deposits of employees’ housing provident fund accounts, namely, an increase up to 16 billion yuan in annual interest income for the employees based on the 2015 year-end housing provident fund payment balance.

    (5) Adjusted policies for pilot projects oriented lending:MOHURD, together with MOF and PBOC, made adjustments to policies pertaining to hpf loans in support of security housing oriented pilot projects. As of 1 January 2016, those pilot cities that had not released project loans should not issue hpf project loans any more; those cities having proceeded with pilot projects with certain pilot projects pending loan issuance should neither issue hpf loans any more in principle nor adjust or add any pilot projects. As for the pilot project loans already issued and not paid off yet, relevant authorities should see to the appropriate arrangements so as to ensure timely loan repayment.

    (6) Pushed ahead with the information technology development: MOHURD organized and compiled Technical Specifications for Housing Provident Fund System, and Guiding Rules for Housing Provident Fund Information Technology Development. Measures were taken to expedite the advancement of implementation of Norms on Housing Provident Fund Essential Data, promote the data application system for housing provident fund bank settlement and increase risk prevention and control capability. By end of 2015, 18 cities’ housing provident fund management centers had completed implementation of the standards and established connectivity so as to meet the requirements for real-time and synchronous operability of the three accounts relating to the fund, services and financial management of the housing provident fund management centers. To be aligned with the nationwide “Internet Plus” action plans, initial steps were taken for development of the housing provident fund’s all-in-one comprehensive service platform with functions such as service hotline 12329, SMS, WeChat, Weibo, Mobile APP, Cyberspace Service Center and Self-Service Terminals, in a bid to further improve housing provident fund management and service standards.

    (7) Improved the statistical system:MOHURD released Management Measures on Housing Provident Fund Statistics for accurate and timely disclosure of information about status of housing provident fund service operation, revised Housing Provident Fund Statistical Reporting System after approval by National Bureau of Statistics, and developed the housing provident fund statistical information system. Management Measures on Housing Provident Fund Statistics elaborates on the expanded duties of the statistical jobs, working principles and job responsibilities, improved the statistical indicator system, and further enhanced supervision over and administration of the statistical work.

    (8) Perfected the information disclosure system: MOHURD, MOF and PBOC jointly issued Notice on Perfecting Housing Provident Fund Information Disclosure System, ramped up efforts in housing provident fund information disclosure, and organized and conducted industry-wide information disclosure training. All cities comprised of districts, all provinces (autonomous regions) and the nation released the 2014 Annual Housing Provident Fund Report before end of March, April and May, respectively, and thus increased transparency in housing provident fund management, marking a positive step towards goals of setting up an open and standardized housing provident fund system as well as ensuring public disclosure of objective information about housing provident fund management and operation.

   As 2016 embraces the opening of the 13^th Five-Year Plan for Development, housing provident fund is gearing up for making a positive contribution to achievements of boosting consumption, reducing inventory, ensuring growth and improving people’s well-being to accommodate the wide range of decisions and deployments made by the CPC Central Committee and the State Council, comprising measures such as implementation of policies on hpf withdrawal and use for unleashing surplus fund to bolster housing consumption and assist in paying employees’ housing improvement, making full use of the “Internet Plus” technology to expedite development of the consolidated nationwide platform with hpf account transfer and connection interoperability, and ramp up efforts in development of housing provident fund’s comprehensive service platform for delivery of quality and efficient services to paying entities and employees, tightening grip on implementation of responsibility system for construction of clean government with reinforced preventive measures for control of risks to ensure security of housing provident fund; and further improving information disclosure to increase transparency in managemnt, proactively accept public oversight and advance the development of an open and standardized housing provident fund system.