Source: ICE BofA Asian Dollar High Yield Corporate China Issuers index; Graphic: Axios Visuals

With defaults mounting in China’s real estate sector, Beijing has intervened more forcefully to contain the damage.

Catch up quickly: The Chinese government relaxes the flow of credit. He recently reduce reserve requirements for banks and asked banks to grant more loans to real estate developers. To encourage mergers and acquisitions, it declared that the loans securing such transactions will not be subjected to the “three red lines” test which effectively froze loans to real estate developers.

  • The government has also asked banks to accelerate the mortgage approval process for consumers who wish to purchase properties from cash-strapped developers.

Why is this important: Since China Evergrande, the group’s largest and most struggling developer, began hinting at a default last fall, the bigger question for markets has been how much the industry would be engulfed by the crisis.

  • “I don’t think policymakers want to see more and more Evergrandes come out… The government is trying to break the vicious circle by starting to relax [policy], and stabilize the industry, ”Tracy Chen, fixed income portfolio manager at Brandywine Global Investment Management told Axios.

Inventory: High-yield developers are always locked outside offshore bond market due to skyrocketing returns. But the free fall in bond prices appears to be over – yields have stopped rising and started moving the other way, according to data from the ICE BofA Index.

The big picture: Political support or not, the sector remains a minefield for investors. Hidden Reports off balance sheet debts, as good as corporate governance issues fueled by business-to-business deals, investors are poised for more surprises, Chen said.

The bottom line: The real estate sector accounts for about a quarter of economic activity in China, while housing accounts for about 70% of the individual wealth owned by the Chinese. It is “too important for policy makers not to ensure his well-being,” adds Chen