(Bloomberg) – China’s support of China’s struggling real estate sector is increasing as the growing pressure in the industry could lead to a deeper economic slowdown.

Financial News, a publication of the Central Bank-backed Financial News, reported Monday that authorities are encouraging banks and property companies to finance acquisitions of distressed developers.

China also provides credit support for an economy that is under pressure from the property slump. On Monday, domestic banks lowered borrowing costs for first time in twenty months. The move follows action by the People’s Bank of China earlier this month to cut the amount of cash banks must hold in reserve, freeing up 1.2 trillion yuan ($188 billion) of cheap long-term funds for lenders.

As a result, some developers like Kaisa Group Holdings Ltd. (China Evergrande Group) are struggling to sell assets and raise cash to service their mounting debts. Recently, regulators relaxed the restrictions by encouraging more powerful real estate companies to use the offshore interbank bond marketplace for financing. 

Lenders will be urged to help “quality” developers acquire projects of large developers faced with difficulties, the Financial News report said, citing a notice from the central bank and the nation’s banking regulator. 

The PBOC didn’t immediately reply a fax seeking comment.

The report also said the PBOC and the country’s state-asset watchdog held a meeting recently with some large private and state-owned real estate companies to encourage them to acquire quality projects from distressed developers.

Financial authorities have asked lenders not to “blindly” call back or cut off loans to struggling developers, it added.

Highly leveraged developers will look to dispose of assets and this present opportunities for onshore capital, investment and fund managers, according to Jones Lang LaSalle Inc.’s Asia-Pacific Chief Executive Officer Anthony Couse.

“The Chinese government will look with that controlling hand to support some of those developers as they divest assets to meet payments and look at corporate restructuring,” Couse said Monday in an interview on Bloomberg Television.

Sunac China Holdings Ltd., the nation’s fourth-biggest builder by sales, recently sold two real estate projects to rival Hangzhou Binjiang Real Estate Group Co. as part of efforts to recoup cash.

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