The special loans for developers would be the biggest financial commitment yet from Beijing to contain the crisis. The funds will be channeled through China Development Bank and Agricultural Development Bank of China, according to the people, who asked not be identified discussing private information.  

The PBOC also cut its one-year loan prime rate on Monday, lowering it by a smaller-than-expected 5 basis points to 3.65%, the first decline since January. The drop in the LPRs followed the central bank’s surprise move last week to lower the rate on its one-year policy loans by 10 basis points.

“We’ve already reached the point where the central government really needs to step in,” said Hyde Chen, head of strategy and asset management for Haitong International, in an interview with Bloomberg TV. With the housing market contributing around 20-30% of gross domestic product, it’s become an “elephant in the room.”

“They really need to provide a backstop, to provide confidence that a housebuyer can say, ‘OK, the house I bought can be delivered’,” he added.

Eoin Treacy's view

The property sector is a vital component of the Chinese economy. The one thing property investors have bet on over the decades is every effort to reduce leverage has resulted in more stimulus being provided as soon as weakness threatens growth. So far, the quantity of liquidity supplies has been relatively small but the pace of provision is accelerating.

That’s putting downward pressure on the Renminbi. China cannot both stimulate the economy and simultaneously support the currency. It’s one or the other.

Meanwhile, the pattern of Chinese equities listed in the USA leading the Nasdaq on days when everything else falls was reenforced today with Baidu, Pinduoduo, NetEase and JD.com being four of only five stocks to post a positive return today.