Zou Lan, head of the monetary policy department at the People's Bank of China, said the change will apply to 30 well-performing developers with a certain "systemic importance" in terms of scale, area of operations and other factors.

The move adds to signs that China's leadership now favors economic stability over action on underlying problems, such as excessive debts. The three red lines had been meant to rein in credit to developers and tamp down real estate speculation.

Zou did not reveal specifics of the new action plan designed to strengthen balance sheets. But the current cap on a borrower's debt-to-equity ratio are among the requirements expected to be relaxed.

The action plan also includes 100 billion yuan of loans for rental housing, as well as a refinancing scheme for asset management companies designed to encourage mergers and acquisitions within the industry, the state-run Xinhua News Agency reported.

China's top 30 developers sold about 5.2 trillion yuan ($775 billion) worth of housing in 2022, according to the China Index Academy -- around 40% of the nationwide total for January-November last year published by the government.

The PBOC and other regulators led the creation of the three red lines in 2020. Developers that fail to satisfy minimum standards -- a 70% ceiling on liabilities to assets, a 100% ceiling on debt to equity, and more cash on hand than short-term debt -- are assigned to one of four categories with varying limits on borrowing.

Banks responded by cutting back on credit to the property sector, which in turn resulted in a liquidity crunch at China Evergrande Group and other major developers. Work on housing ground to a halt.

But China has been loosening curbs on the industry since President Xi Jinping in October secured a rare third term as leader of the Chinese Communist Party in October. As part of a sweeping relief package announced in November, authorities urged banks to extend repayment deadlines for loans used to build housing by a year. Regional governments were told to lower the floor for mortgage rates.

Housing demand remains sluggish throughout China. New home prices across 70 major cities dropped over 70% in November compared with October.

The downturn in real estate, which is believed to account for around 30% of China's gross domestic product when related industries are included, has dealt a major blow to economic growth, regional finances and the financial system. Homebuyers frustrated by unfinished construction went on mortgage strikes across China last summer.

There is concern that China is simply punting its debt problem by easing restrictions on the property sector. Excluding the financial sector, China's debt equaled 295% of GDP at the end of June, reaching a new record, according to the Bank for International Settlements.

Demand for homes is expected to fall in the long term as China's population shrinks, adding to the uncertainty over the property sector.

Still, Xi appears to be prioritizing policies that promote economic and social stability. China recently signaled an end to its wide-ranging crackdown in the technology sector, with a top banking regulator saying the yearslong campaign to rectify problems with fintech operations was "basically complete."