By Xie Yu, Kevin Huang and Li Gu

HONG KONG/BEJING (Reuters) -Country Garden has won approval from its creditors to extend payments for an onshore private bond, according to sources and a document seen by Reuters, in a major relief for the embattled Chinese developer as well as the crisis-hit property sector.

Country Garden was seeking approval from its creditors to extend the maturity on a 3.9 billion yuan ($540 million) onshore private bond in a vote that ended on Friday night.

An unprecedented liquidity crisis in China's vast property sector is a major risk to a sputtering post-COVID recovery in the world's second-biggest economy, which has rattled global markets.

Country Garden debt payment extension buys time for China's largest private developer to avoid default, and is good news for financial markets and the Chinese government, which has announced a raft of measures to support the property sector.

The extension means the developer can repay the debt in instalments over three years, instead of meeting its obligations by Saturday. The bond is not publicly traded.

In Friday's vote, 56.08% of participating Country Garden onshore creditors approved the extension, 43.64% opposed and 0.28% abstained, an official document shared with bondholders showed.

Country Garden did not immediately respond to a request for comment. The sources, who have direct knowledge of the matter, asked not to be named as they were not authorised to speak to the media.

China's property sector, which accounts for roughly a quarter of the economy, has lurched from one crisis to another since 2021 after the authorities cracked down on developers' debt-fuelled building boom.

As Country Garden's financial woes spiralled over the past month, Beijing has rolled out a string of support measures including cutting mortgage rates and removing some curbs on home purchases.

The authorities are set to take further action, including relaxing home-purchase restrictions as they scramble to tackle a deepening crisis in its massive debt-riddled property sector, Reuters reported on Friday.

Country Garden's reprieve may give onshore bondholders some relief, but there is still a long way to go as China tries to defuse risks in the crisis-hit property sector and bolster the economy, analysts said.

"Sales in the biggest cities in China may see meaningful improvement over the next couple of months as Beijing cuts mortgage rates and makes them more easily available to buyers," said Guotai Junan International's chief economist Zhou Hao.

"However, how the improvement will trickle down to help the cash flow of developers remains to be seen. Plus different types of developers are likely to benefit from it very unevenly. Those with more projects in the first-tier cities may benefit first."

The slump in the Chinese property market is driven by more fundamental factors than the cost of borrowing, including broader debt worries in the economy, white-collar workers taking pay cuts and a demographic downturn, analysts say.

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Until this year Country Garden was the largest Chinese developer by sales. The company was considered financially sound compared with peers like China Evergrande Group, which defaulted on its debt in 2021.

While Country Garden's liabilities are only 59% of Evergrande's, it has 3,103 projects across China, compared with around 800 for Evergrande - making the company matter to systemic stability.

A default by Country Garden would have exacerbated the real estate crisis and put more strain on its onshore lenders.

The developer's financial woes became public last month after it missed two dollar-coupon payments totalling $22.5 million, raising fears that the country's deepening property debt crisis would spill over to the broader financial sector.

Country Garden still faces another major challenge next week, when the grace period ends for last month's missed coupon payments worth a total of $22.5 million on the two offshore dollar bonds.

The developer also has dollar coupon payments on its other offshore bonds coming due each month for the rest of 2023. And it has onshore bond payments totalling 12.6 billion yuan by the end of the year, according to CreditSights.

Moody's slashed Country Garden's credit rating by three notches to Ca from Caa1 on Thursday due to worries it could be on the brink of default. It said the firm was facing tight liquidity and recovery prospects for bondholders could be weak.

Country Garden warned on Wednesday of default risks if its financial performance continued to deteriorate, and said it "felt deeply remorseful" for its record loss in the first half.

(Reporting by Xie Yu in Hong Kong, Kevin Huang and Li Gu in Shanghai; Editing by Sumeet Chatterjee and William Mallard)