BEIJING - China should establish a national housing bank to optimize use of China's housing provident fund and stimulate the sluggish market, according to officials with the fund.

It's time for China to establish a policy-based housing financial institution, or a national housing bank to boost housing demand to stabilize economic growth, said Zhang Qiguang, head of the housing provident fund supervision department with the Ministry of Housing and Urban-Rural Construction.

The property sector is still one of the key driving forces to power the world's second largest economy and sudden market contraction may trigger risks related with overcapacity, debt default and shadow banking, Zhang wrote in the Economic Observor paper on Sunday.

He pointed out China's real estate market has experienced structural changes.

Some cities are inundated with inventory while in others demand for better houses and from rural residents moving to urban areas is rising. Real estate is no longer the top investment choice for many families and cash-strapped banks keep a tight rein on loan interest rates out of profit concerns.

The article proposed integrating the local housing provident fund regulators into a national housing bank to offer low-interest-rate housing loans to help middle and low income families afford houses.

It will also reduce financial burden on commercial banks and facilitate interest rate liberalization.

The articles also suggested including rural workers who seek jobs in urban areas into the housing provident fund system and offer government support to help them purchase houses.

China has 342 local housing provident fund regulation stations across the country with more than 3.7 trillion yuan ($603 billion) in all accounts.

The Chinese central bank and another two government organs announced minimum down payments for first and second home purchases using the housing provident fund, which offers urban residents lower rates than those of commercial banks, were lowered to encourage housing purchases on Mar 30.