(Yicai Global) June 9 -- A real estate industry association in eastern China's Zhejiang province has established a CNY10 billion (USD1.5 billion) fund with a state-owned partner to promote mergers and acquisitions among troubled property developers.

The Zhejiang Real Estate Association and Zhejiang Province Zheshang Asset Management (ZSAMC) set up the fund recently, the partners said to Yicai Global. The controlling shareholder of the latter is Zhejiang International Business Group, a company specializing in the disposal of non-performing assets of financial institutions in the eastern province.

Several provinces and cities, including Jiangsu, Chongqing, and Henan, have recently launched bailout policies for local real estate enterprises to help them reorganize amid macroeconomic pressures. 

The new fund in Zhejiang will help local real estate enterprises or projects in order to strengthen stability in the local property market, said Li Chuanquan, chief strategy officer at ZSAMC.

Several non-state-owned property developers have been having financial difficulties in Zhejiang this year. For example, Hong Kong-listed Shinsun Holdings defaulted on a US dollar bond for the first time in March. On June 7, another USD200 million default followed.

Liquidity problems have started showing in the stock price of another Hong Kong-listed developer, Jiayuan International. The share price [HKG: 2768] tumbled by 41 percent in one day on May 18 while falling almost 90 percent in the past year.

Editors: Tang Shihua, Emmi Laine, Xiao Yi