CHINA plans to embark on a major drive to sell its public housing stock as part of a key policy to win the support of the people and combat inflation. In a massive scheme along similar lines to Hong Kong's Home Ownership programme, millions of people will be urged to buy their rented homes. The government hopes to raise billions of dollars from the sales to fund new mass housing projects. More money will be saved from the reduced maintenance and management burden. All cities are also set to be ordered to establish provident funds so tenants can buy their own homes. The two important policies are expected to be officially announced later this year. They are seen as key parts of the housing reform programme aimed at improving the poor living conditions of many of China's 1.2 billion population, who consider housing as the number one issue facing the authorities. Vice-Premier Zhu Rongji has said the housing problem was the top priority to win ''people's hearts''. The third housing reform working committee of the State Council will study the issue next month, and an announcement is expected soon afterwards. The government is also expected to reveal new banking, foreign trade investment and agriculture policies at the same time. Yu Xiaoping, a senior economist at the People's Construction Bank of China, said details would be revealed next month. At last week's China Property '93 conference in Beijing, she told delegates that individuals would be able to buy public houses and a provident fund would be set up. One Beijing source said: ''After the meeting, I expect the official announcement to be made definitely before the end of this year. ''The provident fund will be based on the Singapore example. Everyone must deposit perhaps five per cent of their pay into it. The government and the employer will also supply about the same amount to the banks. ''The number of people who buy their home will depend on how high the price is. ''If they can put all the money up front, then I think the price will be lower.'' Five years ago, a pilot scheme to sell public homes was set up in Shenzhen. It has since been extended to other cities, including Beijing, Shanghai and Tianjin, and has been considered a success. If 60 per cent of homes were sold at $270 per square metre, the government believes it would raise $440 billion for new projects, according to housing reform figures quoted in the Hong Kong Chinese press. The reduction in maintenance and management costs will also save another $3 billion. It hopes to drive people away from renting by allowing them to buy their homes at low prices. A source said there had been resistance to selling in recent years because officials wanted to wait until incomes rose sufficiently so they could charge a higher rate. But the authorities now want to raise the money to push ahead with much needed projects. They hope people who buy homes will work harder to meet monthly mortgage instalments. But it is thought there will be resistance from employers who can keep employees because they supply accommodation for workers. The provident fund is expected to be implemented individually by cities. An experimental scheme was set up in Shanghai. If the quota is breached, it is believed priority, reserve or lottery systems would be implemented.