HONG KONG (Reuters – Shares of Chinese property developer shares rose Friday after media reports suggested that presale proceeds from residential properties are being made more accessible to the sector. It is this latest attempt by authorities to relieve the industry’s cash crisis.

Evergrande, the largest property company in China, has highlighted how China’s financial sector is now facing a liquidity crisis due to regulatory restrictions on borrowing. Other developers have been affected by the contagion, which has led to a severe slump in China’s property market. This sector accounts for 25% of China’s economy.

Cailianshe (an online service that provides financial news) said on Thursday night that new rules have been issued by authorities to fix any “overtightening” that may have occurred at county or municipal level with respect to developers’ escrow funds.

The report stated that developers now need only to hold funds in escrow accounts based on construction costs. This allows them more freedom to draw funds.

The Hang Seng Mainland Properties Index was up 2.2% compared to a flat main.

Notable gainers included China Vanke, which jumped 4.9%, and Guangzhou R&F Properties, which surged 7.3%.

Chinese developers can sell residential properties before they are completed, however, these funds must be placed in escrow accounts. They may withdraw funds in phases depending on the amount of work they’ve completed.

Analysts said that pre-sale cash held in escrow accounts for approximately 50% of the funds available to developers.

Reuters last month reported that China is drafting national rules for property developers in order to facilitate access to pre-sale funds kept in escrow accounts.

According to the 21st Century Business Herald, the national regulations are designed to uniformize the regulation of escrow accounts. This is because some cities have tightened their rules in the past to prevent developers from accessing all funds.

According to the report, new regulations will increase local oversight and require banks monitoring and reconciling escrow accounts with housing authorities.

Citi reported that the easing of escrow restrictions is a needed policy to ease the “pain” and “comfort our spirit”, as well as a benefit for liquidity.

According to the investment bank, there are also positive indicators in this sector such as state-owned companies buying distressed developer assets and creditors lending debt.

However, it warned that improvements in fundamentals are yet to come. It expected a 30% decline in sales of property in the first quarter as well as a 20% drop in earnings in 2021.

Fitch estimates that the sector holds $39 billion in offshore bonds, and 163.7 billion Yuan ($25.76 trillion) of onshore bonds due to mature by 2022.

CREIS property research said in January that developers’ fundings dropped 70% from last year to 79 billion dollars. CRIC however, stated that home sales for January fell by 40%.

($1 = 6.3536 renminbi)