As property prices rocket across China, Beijing has appealed to the country's banks and insurers to help accelerate the development of rental markets as a way of making homes more affordable - and rein in speculative sale markets.
The big state banks have responded by pledging more than 3 trillion yuan ($A613 billion) in rental housing financing, including for real estate developers, leasing firms and tenants, according to Reuters calculations. The total value of the rental market was 1.3 trillion yuan in 2017.
China Construction Bank Corp (CCB) , the second-largest lender, is the most visible example of this trend, giving loans to renters at ultra-low interest rates with long repayment periods.
CCB began offering the loans in the southern boomtown of Shenzhen in November. Under its pilot scheme, home renters can borrow up to 1 million yuan with no collateral and have up to a decade to repay their loans.
"The government, from central to local, is very determined," CCB President Wang Zuji told Reuters, referring to the push to expand the rental market. He added that supporting policy measures in taxation and land supply were still being studied by the government, and that CCB was still "exploring" how it could finance the initiative.
The loans have found many takers in Shenzhen, where home prices have sky-rocketed in recent years as the city establishes itself as China's Silicon Valley with tech giants like Tencent Holdings Ltd and Huawei Technologies.
Liu Feng, a 28-year-old product manager, was one of the first to take out a rental loan from CCB for his 90 square metre three-room apartment in Shenzhen.
He said his monthly payments under the plan - including interest - came to about 6,000 yuan, less than if he paid for it himself, meaning the bank was effectively subsidising his rent.
"The property developer leased the apartment to CCB, and CCB leased it to me," said Liu.
Also in 2017 Industrial and Commercial Bank of China Ltd launched a similar product in Guangzhou and Bank of China Ltd issued its first loan to renters in Xiamen. Both of the southern cities have been chosen by the central government to test real estate sector reforms.
So far, only large state banks are offering the loans. Multiple sources at mid-sized and small lenders said they were daunted by default risks, high costs and low returns.
Losses are likely, the sources said, as the loans have to be priced below market rates due to the pressure on banks to show support for developing the rental market.
A retail loan officer at one of China's 12 joint-stock banks said his bank had decided not to offer the product.
"After CCB launched the products we looked into it closely, but only to find that was not something we could afford - interest rates were just too low to cover the cost of funding," the officer said, declining to be named. "Only deep-pocketed large state banks can bear the cost."
That is a dilemma often facing Chinese banks. Beijing wants them to meet government demands and fulfil national aims, which can mean having to adopt non-commercial, riskier lending practices.
"The products have low bars for loan applicants, so risk control is really the key," said Yang Xianling, chief economist at Ke Research Institute. "A credit-based mechanism needs to be introduced to carefully prevent speculators."
To mitigate risks, banks are considering packaging rental-related loans into asset-backed securities and real estate investment trusts and transferring risk to other investors, the sources said.
CCB also tested out another rental-loan scheme with the local government in Foshan, a smaller manufacturing city near Shenzhen with a large number of young migrants.
CCB has backed the plan with 300 billion yuan, but Foshan Jianxin Property Leasing Co, the government firm overseeing the program, said it was concerned about low returns.
"We have examined more than 100 projects of all kinds, but their returns are super low," said Cai Yu, general manager at Foshan Jianxin. "Frankly we could have earned more if the money were deposited at a bank."
Foshan Jianxin has been ordered by local authorities to issue loans at below market price to cultivate the rental housing market and lure tenants, Cai said.
Foshan Jianxin has offered monthly rents of as low as 799 yuan for fully furnished rental homes, about 30-40 per cent of them at below market price.
Therefore, even with the capital infusion from CCB's subsidiary and others, the company may still have to sell houses in a few years to cover losses, Cai said.
Despite that, CCB said this "Foshan model" has been copied in 18 other cities in Guangdong province, and it could be extended to other smaller cities nationwide.
The push into the rental market by CCB and local authorities shows how political control of state-owned enterprises enables Beijing to allocate investments and resources quickly to meet government priorities. Profitability is secondary.
At least 51 state-owned home rental companies similar to Foshan Jianxin have been set up in the 12 pilot cities designated for rental housing reforms, according to Wang Menghui, minister of housing and urban-rural development.
"Most private companies won't enter the space on a large scale because they can't see a chance to make money," Cai said.
"That's why SOEs are going to the front line."