(Bloomberg) -- Chinese developers struggled to extend a rally in credit and share markets Thursday, underscoring investor desire for more government steps to help the property sector.

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A Bloomberg index tracking Chinese builder shares fell as much as 3.3%. That was a reversal after an 8.6% jump Wednesday, the biggest in four months, which was sparked by news that authorities were working on a proposal to help government-backed China Vanke Co. plug a funding gap of about 50 billion yuan ($6.8 billion) this year.

Developer bonds were largely flat Thursday, traders said, after many rose the day before.

That all follows a pattern that’s prevailed in the past several years. Government steps to prevent a real estate crisis from leading to broader contagion have tended to result in only short-lived rallies.

The plan for Vanke marked the largest-ever step to address a single developer’s liquidity shortage, and stoked optimism especially toward state-linked builders. But it stopped short of a full bailout.

As Vanke is the weakest among surviving state-backed developers, a rescue for it would provide a backstop for the rest, said Leonard Law, senior credit analyst in Lucror Analytics Singapore. But private and defaulted builders are unlikely to get any reprieve, as they are less systemically important.

That dichotomy is showing up in market prices.

Defaulted property notes are still largely indicated at less than 10% of their face value.

On the other hand, some dollar bonds of Vanke—which looks increasingly unlikely to miss any debt payments this year given the state support—have doubled in the past month. Its note due in May, for example, has risen to about 97 cents from a low of 59 cents on Jan. 16, a level considered distressed. Vanke shares have jumped 37% from a trough last month.

For China’s housing market itself, the picture is still mixed. A brief revival in home sales has fizzled despite multiple rounds of stimulus. Chinese bankers have mostly stopped lending to real estate projects outside major cities such as Shanghai, according to people familiar with the matter.

But in some areas the market is showing some signs of stabilizing, with land plots in key cities sold at high premiums in recent weeks, according to a report in the Economic Information Daily.

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The total amount of distressed bonds and loans issued by Chinese companies fell at the fastest pace in almost nine months last week, according to Bloomberg-compiled data. The shrinking is underpinned by initial signs that the government may take a key role in saving Vanke.

There were several other developers partially owned by state-owned companies facing cash strains in the past, such as Sino-Ocean Group Holding and Shenzhen-backed China South City Holdings Ltd. But they didn’t manage to avoid defaults with state support. Timing might have made the difference.

“If Vanke failed, it would be the collapse of a very symbolic real estate company, significantly impacting the central government’s projected trend of stabilizing the real estate market, ”said Huan Li, co-founder of Forest Capital Hong Kong Ltd.

--With assistance from Pearl Liu and Trista Xinyi Luo.

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