(Yicai Global) Aug. 11 -- Shares of Zhongnan Construction Group jumped after a Chinese distressed asset management company threw a lifeline to the private real estate developer.

Zhongnan's stock price [SHE: 000961] surged as much as 7.2 percent to CNY2.82 (40 US cents) intraday and closed 3 percent up. The shares are still 35 percent down this year.

Zhongnan Holding Group, the parent of Zhongnan, and Jiangsu Asset Management established a CNY2 billion (USD296.7 million) fund for Zhongnan's debt restructuring and to restart building ongoing projects, the Shanghai-based property developer said in a statement yesterday, citing a notice from the shareholder. The 'bad bank' contributed CNY1.8 billion to the three-year fund and the parent covered the rest.

This is the second time Zhongnan Holding got financial support from an AMC. In May, a consortium composed of Zhongnan Holding, China Huarong Asset Management, and several Jiangsu province-based state-owned entities formed a fund with a scale of up to CNY5 billion to resume construction of ongoing projects.

Zhongnan has been dragged down along with the sector. In the first half, the construction company's net loss was expected to have amounted to a sum between CNY1.5 billion and CNY2 billion, according to the firm's forecast released on July 15. In the first half of 2021, Zhongnan made a profit of CNY1.7 billion.

At a meeting in late July, the central government emphasized the importance of stability in the property market to ensure the delivery of prepaid homes. Before that, several regions recorded suspended mortgage repayments in mid-July because home buyers refused to continue paying for new homes that are not proceeding as planned. Several Chinese real estate developers stopped building due to a liquidity squeeze since the second half of last year.

The central government's meeting has accelerated bailouts. On Aug. 5, China Huarong said it and Yango Longking Group have partnered so that one of China's four big bad banks will help Yango's units to restructure and to deliver homes as scheduled.

Editor: Emmi Laine