The financial pressure on mainland residential developers has eased as liquidity improves, and Beijing is unlikely to tighten its loose monetary policy because the economic recovery is still fragile, according to Standard & Poor's. The credit rating agency yesterday raised the short-term outlook for the mainland's residential property sector to 'neutral' from 'negative', based on signs of recovery in the real estate market. Improved operating conditions had reduced the risk of refinancing and helped ease the liquidity crisis among developers, said S&P credit analyst Bei Fu, who added that stronger than expected sales had helped strengthen their balance sheets and reduced inventory risk. Nine out of the 13 mainland developers covered by the firm had a negative outlook. Ms Fu said the agency was likely to revise the rating outlook on several developers to 'stable' from 'negative' over the next few months. Nevertheless, S&P said it expected the housing market to remain volatile this year because of potential changes in government policy. Transaction volume was likely to take a breather, because pent-up demand from last year had been met in the first half of this year and supply had been reduced. 'Relatively loose monetary policy and some supportive policies for the real estate sector will not be tightened immediately to a very harsh degree,' said Ms Fu, adding that the policy could change if the mainland sustained economic growth above 8 per cent, inflation reversed course and accelerated, and if grassroots discontent with the inadequate supply of affordable housing became a policy priority. But independent economist Andy Xie forecast Beijing might cut growth in new loans by half in the second half of this year to deflate a bubble in the world's second-best-performing stock market. 'The government is worried that this bubble is becoming too big, so they're going to cut credit growth by probably half in the second half,' Mr Xie told Bloomberg TV. 'I think the property and stock markets will come under pressure, probably around October.' To stimulate the economy, the People's Bank of China cut lending rates five times last year, lowering the one-year benchmark lending rate from 7.2 per cent to 5.31 per cent.