Inequity in Housing Welfare: Assessing the Inter-City Performance of China’s Housing Provident Fund Program

Round 1

Reviewer 1 Report

It is an interesting and remarkable policy implication research topic to examine the performance of HPF program in China. The authors have successfully shown the existence of spatial heterogeneity in HPF program performance by investigating a panel data of 287 Chinese cities between 2015 and 2020. 

Concerning the empirical findings in the paper, following are my comments:

1. The authors need provide more background information about China’s HPF program before jumping into examining the performance of HPF programs (section 2.2).

2. The purpose and meaning of certain research methods are still unclear. For example, Fig.2 is not well explained concerning definition of hot spot, and how it is related to previous statistics in section 3.2.

3. No referenced source for participation rate 33.13% in 2020 on page 6 (section 2.2). What is the denominator in particular?

4. The authors introduce a kernel density function to estimate the distribution of HPF performance measures (section 3.3) yet they do not explain why it is needed.

5. Regression model is not appropriately labelled in on page 13 (section 3.4). No description for subscript ? is given. And what is individual effect variable if it is a city level regression?

6. Notation in equation (5)-(6) is not well-explained. No description for the spatial

weight matrix Wij is given. Neither is the description for subscript ? and j (section 3.2).

7. The average value of loan beneficiary rate is 41.484. % is missing.

8. Grammatical errors need to be corrected. “Since the eastern cities in China have a large proportion of private economies, thus the prosperity of the private economy may lead to a lower deposit rate, compared to western cities which have a high rate of public sector employees.” Delete the first “the” and “thus.”

“Though the reforms are not uniformly across the whole country, they may further help to narrow the benefit cap between cities.” “uniformly” is wrong.

 

Author Response

Response to comments by Reviewer #1

Thank you for the positive comments and encouragement. We are very grateful for your comments and suggestions that help strengthen the presentation of our results and improve the quality of our paper. In the following, we provide a point-to-point response to reviewer's comments.

1. 1. The authors need provide more background information about China’s HPF program before jumping into examining the performance of HPF programs (section 2.2).

[Our Response]: We thank the reviewer for this valuable comment. We agree with the reviewer that more information on HPF should be supplemented. Following your suggestion, we have added more background information about China’s HPF program in the literature review.

The concrete content is as follows: "The system is based on compulsory savings, which requires both enterprises and employees to pay HPF [16]. The deposit basis is the average monthly salary of the employee in the previous year, and the contribution rate varies across cities but in general ranges from 5% to 12% [13,36]. Meanwhile, there are two main ways to make personal use of the HPF: loans and withdrawals. All employees who have joined the HPF program can apply for a withdrawal or a loan [38]. In addition, the HPF management center in each city is responsible for the management and operation of the local HPF program "[Page 3, Line 11-18].

 

2. 2. The purpose and meaning of certain research methods are still unclear. For example, Fig.2 is not well explained concerning definition of hot spot, and how it is related to previous statistics in section 3.2

[Our Response]: We thank the reviewer for this valuable comment. In the revised manuscript, more elaborations on the definition of hot spot analysis have been added.

The concrete content is as follows: " This study uses the spatial hotspot analysis (Getis-Ord Gi*) to detect the clustering pattern of the distribution of HPF performance"[Page 6, Line 2-3].

 

3. 3. No referenced source for participation rate 33.13% in 2020 on page 6 (section 2.2). What is the denominator in particular?

[Our Response]: We thank the reviewer for raising the concern. Following your suggestion, in [Page 3, Line 22-23], we have added the referenced source. The concrete content is as follows: "Although the scale of contributors is noticeable, the participation rate among urban workers is insufficient, accounting for only 33.13% in 2020 [39,40]."

 

4. 4. The authors introduce a kernel density function to estimate the distribution of HPF performance measures (section 3.3) yet they do not explain why it is needed.

[Our Response]: We thank the reviewer for raising the concern. Therefore, in the revised manuscript, efforts have been made to further explain the reason for introducing a kernel density function. The details are as follows: "The variation coefficient and the Gini index may show the overall evolution of the spatial differences of HPF performance, but it cannot depict its specific spatial distribution pattern. Thus, we employ the kernel density function to estimate the distribution characteristics of HPF performance." [Page 6, Line 23-26].

 

5. 5. Regression model is not appropriately labelled in on page 13 (section 3.4). No description for subscript ? is given. And what is individual effect variable if it is a city level regression?

[Our Response]: We thank the reviewer for raising the concern. Following your advice, in [Page 6, Line 36,38], we have added the description for subscript ? and We have modified the "individual effect" as" city effect ".

 

6. 6. Notation in equation (5)-(6) is not well-explained. No description for the spatial

weight matrix Wij is given. Neither is the description for subscript ? and j (section 3.2).

[Our Response]: We thank the reviewer for pointing out this. In the revised manuscript, more description for " W_ij " and "subscript ? and j " in equation (5)-(6) have been added.

The details are as follows: "Where i and j represents city i and city j. W_ij is the spatial adjacency matrix." [Page 6, Line 7].

 

7. 7. The average value of loan beneficiary rate is 41.484 % is missing.

[Our Response]: We thank the reviewer for pointing out this. In [Page 7, Line 21], we have modified as"41.484 %".

 

8. 8. Grammatical errors need to be corrected. “Since the eastern cities in China have a large proportion of private economies, thus the prosperity of the private economy may lead to a lower deposit rate, compared to western cities which have a high rate of public sector employees.” Delete the first “the” and “thus.”

“Though the reforms are not uniformly across the whole country, they may further help to narrow the benefit cap between cities.” “uniformly” is wrong. 

[Our Response]: We thank the reviewer for pointing out this. We agree with the reviewer that these sentences have grammatical errors.

In [Page 13, Line 20-23], we have modified as "Since eastern cities in China have a large proportion of private economies, the prosperity of the private economy may lead to a lower deposit rate, compared to western cities which have a high rate of public sector employees."

In [Page 14, Line 15-16], we have modified as "Though the reforms are not uniform across the whole country, they may further help to narrow the benefit cap between cities."

All in all, we appreciate for Editor/reviewer’ work earnestly, and hope that the correction addresses the concerns well.

Yours sincerely,

Authors

March 8, 2023

Author Response File: Author Response.docx

Reviewer 2 Report

This paper analyses the performance of the Housing Provident Fund (HPF) policy using a sample of 287 Chinese cities. In particular, the paper explores the inter-city differences in the performance of HPF and their relevant influencing factors. The methodological framework used is ‘access–process–outcome’. The topic is interesting, and the paper is overall well-written. Here are my comments to improve the paper:

1- Make sure the paper is presented in the MDPI format, using the template provided.

2- your abstract is overall well-written and provides the reader with a good overview of the paper. Perhaps add one sentence, further clarifying the methodology used in the paper.

3- Rephrase this sentence, as the first part is positive, while the second part is negative. The English structure you used doesn't work: "The growing market mechanism not only improves rates of homeownership but also intensifies housing inequality for different household groups (Huang & Jiang, 2009; Zhang et al., 2016)."

4- at the start of the second paragraph of the introduction section where you first introduce HPF, provide more information on what they are. International readers would like to learn about them at the beginning of the paper. Who can apply for them? How much are they usually? Some more contexts would be helpful.

5- In the introduction, further discuss what previous research says about HPF, whilst making clearer what knowledge gaps you identified and how your research addresses them. Answer the “so what?” question. Why investigating such matter is important?

6- The novelty/originality should be clearly justified that the manuscript contains sufficient contributions to the new body of knowledge from the international perspective.  What new things (new theories, new methods, or new policies) can the paper contribute to the existing international literature? This point must be reasonably justified by a Literature Review, clearly introduced in Introduction Section, and completely discussed in Discussion Section.

7- you need a brief discussion on housing development. You can refer to two modes of housebuilding, namely speculative development and self-build. Speculative development refers to the construction of a building without commitment from a user, but with the belief that demand exists for the space and that the space will be rented within a reasonable time after the building is completed. Self-building can be broadly defined as any form of housing where the first occupants are involved its construction, this can range from organising the construction to building it themselves. Is HPF related to speculative development or self-build? These discussions would be interesting to explore in your research. Here are some recent publications in this regard:

https://doi.org/10.3390/su13094912

https://doi.org/10.1016/j.jclepro.2019.118657

https://doi.org/10.1016/j.landusepol.2018.06.003

8- you need to introduce the access–process–outcome framework for the readers who are not familiar with this framework. This is completely absent at the moment. Perhaps this can be added to section 3.1 just before you start using the framework.

9- What are the limitations of your methodology/study?

 

10- your discussions are interesting. I think you can do more in the implication section, further clarifying what the implications of your work are for decision makers.

Author Response

Response to comments by Reviewer #2

We would like to thank you for the favorable comments. We are very grateful for your comments and suggestions that helped us strengthen the presentation of results improving the quality of our paper. In the following, we provide a point-to-point response to reviewer's comments.

1. 1. Make sure the paper is presented in the MDPI format, using the template provided.

[Our Response]: We thank the reviewer for pointing out this. In the revised manuscript, the full text has been modified in the MDPI format.

 

2. 2. your abstract is overall well-written and provides the reader with a good overview of the paper. Perhaps add one sentence, further clarifying the methodology used in the paper.

[Our Response]: We thank the reviewer for this valuable comment. Following your advice, in the abstract part [Page 1, Line 13-15], we further clarified the methodology as "Taking 287 Chinese cities as a sample and using the “access–process–outcome” framework, this study explores the inter-city differences in the performance of HPF and their relevant influencing factors."

 

3. 3. Rephrase this sentence, as the first part is positive, while the second part is negative. The English structure you used doesn't work: "The growing market mechanism not only improves rates of homeownership but also intensifies housing inequality for different household groups (Huang & Jiang, 2009; Zhang et al., 2016)."

[Our Response]: We thank the reviewer for raising the concern. We agree with the reviewer that this sentence has grammatical errors, and in [Page 1, Line 31-33], we have modified as "Though the growing market mechanism has significantly improved rates of homeownership, it has also intensified housing inequality for different family groups".

 

4. 4. at the start of the second paragraph of the introduction section where you first introduce HPF, provide more information on what they are. International readers would like to learn about them at the beginning of the paper. Who can apply for them? How much are they usually? Some more contexts would be helpful.

[Our Response]: We thank the reviewer for this valuable comment. We strongly agree with the reviewer that more information on HPF should be supplemented. Following your suggestion and considering the limited space of introduction section, we have added more background information about China’s HPF program in the literature review.

The concrete content is as follows: "The system is based on compulsory savings, which requires both enterprises and employees to pay HPF [16]. The deposit basis is the average monthly salary of the employee in the previous year, and the contribution rate varies across cities but in general ranges from 5% to 12% [13,36]. Meanwhile, there are two main ways to make personal use of the HPF: loans and withdrawals. All employees who have joined the HPF program can apply for a withdrawal or a loan [38]. In addition, the HPF management center in each city is responsible for the management and operation of the local HPF program."[Page 3, Line 11-18].

 

5. 5. In the introduction, further discuss what previous research says about HPF, whilst making clearer what knowledge gaps you identified and how your research addresses them. Answer the “so what?” question. Why investigating such matter is important?

[Our Response]: We thank the reviewer for this valuable comment. Following your advice, we further explained knowledge gaps in previous research and how our research bridges these gaps.

In [Page 2, Line 2-12], We have further clarified the knowledge gaps in three aspects: "First, owing to data limitation, previous studies mainly rely on descriptive analysis and have not provided sufficient quantitative evidence. Second, the HPF in China has been implemented for almost 30 years, but little effort has been made to examine its regional features, especially the nature of spatial equity. Besides, analysis chiefly focuses on a single city or examines a few large cities, but it is unclear how HPF performs across multi-scale cities and regions. Third, there is a lack of analyses of the factors influencing HPF performance."

In [Page 2, Line 18-21], We have further explained how our research fills the above gaps. The concrete content is as follows: "Against this context, this paper takes 287 cities in China as a sample and intends to (1) evaluate the equity performance of the HPF by using the “access–process–outcome” research framework, and (2) reveal the spatial heterogeneity of the HPF performance across multi-scale cities and regions in the Chinese context, and (3) explore the influencing factors of the HPF outcome performance based on analysis of panel data."

In [Page 2, Line 12-16], We have further highlighted the importance of our research. The concrete content is as follows: "As housing commercialisation deepens and housing prices increase rapidly, the regional imbalance in housing welfare represented by the HPF could be further amplified. Thus, further attention is needed to identify the intricate local dynamics that shapes program performance."

 

6. 6. The novelty/originality should be clearly justified that the manuscript contains sufficient contributions to the new body of knowledge from the international perspective. What new things (new theories, new methods, or new policies) can the paper contribute to the existing international literature? This point must be reasonably justified by a Literature Review, clearly introduced in Introduction Section, and completely discussed in Discussion Section.

[Our Response]: We thank the reviewer for raising the concern. Following your advice, we have further clarified the contributions of our research in Introduction Section and Discussion Section.

In Introduction Section [Page 2, Line 22-27], we have further explained the contributions of the article from two aspects: "Different from previous micro-analysis, this paper deepens understandings of China’s HPF from a macro-regional perspective. Since equity is the key target of China's new round of HPF reform, our findings could provide important policy implications for the improvement of the program from a spatial perspective. In addition, examining the equity performance of the program from different dimensions may enrich the content of housing security and housing equality research."

In Discussion Section [Page 14, Line 19 -21]. we have further clarified the contributions of our research. The concrete content is as follows: "By investigating the driving mechanisms of HPF performance, our research may provide an empirical foundation for improving HPF system and a reference for promoting the healthy development of the real estate market."

 

7. 7. you need a brief discussion on housing development. You can refer to two modes of housebuilding, namely speculative development and self-build. Speculative development refers to the construction of a building without commitment from a user, but with the belief that demand exists for the space and that the space will be rented within a reasonable time after the building is completed. Self-building can be broadly defined as any form of housing where the first occupants are involved its construction, this can range from organising the construction to building it themselves. Is HPF related to speculative development or self-build? These discussions would be interesting to explore in your research. Here are some recent publications in this regard.

https://doi.org/10.3390/su13094912

https://doi.org/10.1016/j.jclepro.2019.118657

https://doi.org/10.1016/j.landusepol.2018.06.003

[Our Response]: We thank the reviewer for pointing out this. We have carefully rechecked the influence of HPF system on housing development, especially for housing speculation and self-building.

As for housing speculation, according to Tang & Coulson, the contribution of the HPF to housing speculation is limited [1]. In fact, Chinese housing policymakers are worried about the use of the HPF fund for mere speculation, and has imposed a series of regulations on usage of the funds. These include a maximum on the amount of HPF loans, borrower qualifications, the mortgage interest rate and the term of the loan, as well as a minimum down payment rate for homes that depend on the home's size [1]. In particular, a 20% down payment rate is required when the purchased unit is less than 90 m², while 30% is required for house units greater than 90 m² [2]. When purchasing a second home, a 60% down payment rate is required and the maximum HPF loan amount cannot exceed 600,000 yuan [2]. And the HPF cannot be used to purchase the third house. Thus, HPF plays a limited role in real estate speculation.

In [Page 14, Line 48-53], as suggested by the reviewer, a discussion on the contribution of the HPF to housing speculation have been provided in the revised manuscript:" Moreover, according to Tang and Coulson [52], due to strict government constraints on using the funds, such as borrower qualifications, a maximum loan amount and a min-imum down payment rate, the contribution of the HPF to housing speculation is lim-ited. Therefore, improving fund utilization level and the loan beneficiary rate will help to enhance overall housing welfare."

In terms of self-building, in China, there is a divided urban-rural housing allocation system, which is based on her dual urban-rural land ownership system. In urban areas, the land is state-owned while in rural areas the land is collectively-owned by the villages governed by prefecture government [3]. Therefore, the village assigns each rural household a parcel according to the household size to build their own homes. However, households in urban area do not own any land, whose housing had to be provided by their work-units through a sophisticated socialist planning welfare system before the housing market reform [3]. Due to the influences, the HPF program aim to solve the housing affordability of urban employees instead of rural households [4]. According to the Housing Provident Fund Annual Report 2020, the HPF had issued a total of 2.13 million individual housing loans nationwide in 2020, but only 4 thousand housing loans were issued for self-building and renovation, accounting for 0.4% [5]. Considering special national conditions, the impact of HPF on self-building housing is also limited.

 

Here are some references for the explanation.

[1] Tang, M.; Coulson, N. E. The impact of China's Housing Provident Fund on homeownership, housing consumption and housing investment, Reg. Sci. Urban Econ. 2017, 63, 25-37. https://doi.org/10.1016/j.regsciurbeco.2016.11.002.

[2] The Central Housing Provident Fund Management Center. Notice on adjusting the HPF personal housing Loan policy. http://www.zzz.gov.cn/html/xwzx/tzgg/14799.html

[3] Huang, W. (2022). Government land regulations and Housing Supply Elasticity in urban China. China World Eco. 30(4), 122–148. https://doi.org/10.1111/cwe.12430.

[4] Burell, M. China’s housing provident fund: its success and limitations. Hous. Financ. Int. 2006, 20, 38–49. https://www.researchgate.net/publication/242703774

[5] Ministry of Housing and Urban-Rural Development (MOHURD). Annual report of national housing provident fund management 2020.The Official Website of MOHURD. https://www.mohurd.gov.cn/gongkai/fdzdgknr/zfhcxjsbwj/202107/20210716_761234.html (accessed on 15 October 2021).

 

8. 8. you need to introduce the access–process–outcome framework for the readers who are not familiar with this framework. This is completely absent at the moment. Perhaps this can be added to section 3.1 just before you start using the framework.

[Our Response]: We thank the reviewer for pointing out this. Following your advice, in Research Framework Section [Page 4, Line 19-22], more elaborations on the framework of this paper have been added. The concrete content is as follows: "Access performance refers to the equality of opportunities for individuals to participate in the program. Process performance evaluates the operation of the HPF from two aspects: deposit and use of funds. Outcome performance measures the loan benefit level of participants."

 

9. 9. What are the limitations of your methodology/study?

[Our Response]: We thank the reviewer for this valuable comment. We agree with the reviewer that deficiencies of this article should be clarified. Following your suggestion, in [Page 15, Line 36-40], we have added the limitations of our study. The concrete content is as follows: "This article has certain limitations. Due to the availability of data, the research period is still limited, and the sample does not cover all cities in China. As information disclosure improves, a longer series of panel data can be added to follow-up research. This would help make more systematical analyses of the spatial-temporal characteristics, the influence mechanisms and the relevant policy effects of the HPF program."

 

10. 10. your discussions are interesting. I think you can do more in the implication section, further clarifying what the implications of your work are for decision makers.

[Our Response]: We thank the reviewer for this valuable comment. In [Page 15, Line 22-35], more policy implications of this article, as suggested by the reviewer, have been provided in the revised manuscript.

 

All in all, we appreciate for Editor/reviewer’ work earnestly, and hope that the correction addresses the concerns well.

Yours sincerely,

Authors

March 8, 2023

 

Author Response File: Author Response.docx

Round 2

Reviewer 2 Report

Thank you for addressing the comments.