A city in China has required its farmers to join provident funds and encourages them to buy houses in the city though every family has homesteads. Experts say the local government seeks to plug financial holes.

According to a Chinese language news outlet, Wenzhou city, Zhejiang Province, has set up a housing provident fund for farmers to stimulate the real estate market.

Farmers in the city could join the provident fund as of September 1. The provident fund management department will open individual accounts. 

After farmers pay for the provident fund for 6 consecutive months, they can borrow a loan of between 150,000 yuan and 500,000 yuan ($22,000-$72,000) from the fund when purchasing a house.

The farmers will be offered an interest rate of between 2.7% and 3.2%, which is lower than commercial loans.

However, asking farmers to join the provident fund is actually the government’s attempt to expand the capital reserve and help to make up for financial holes.

Ma Xiang, a private house owner in Wenzhou, said the provident fund is of little significance to farmers.

He pointed out a family often has a homestead, and there is no shortage of houses. Farmers who do not have houses can’t even have enough food and can’t afford to pay the provident fund.

In fact, the local government has run out of money, so farmers are asked to join the provident fund to provide the city with capital and reduce the housing inventory.

Ma Xiang said they are now relying on farmers to alleviate the city’s cash flow problem.

According to the 2021 Annual Report of the Housing Provident Fund, there were nearly 4.2 million housing provident fund payment units across China last year, with 164.4 million participants.

Civil servants and public institutions are usually the participants of the provident fund. However, many private companies do not pay into the fund.

Xie Tian is a professor of marketing at the Aiken School of Business at the University of South Carolina. He pointed out that farmers in rural areas have their own farms and can build their own houses.

When farmers are required to participate in the provident fund, the local government is cheating farmers to plug financial holes.

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