BEIJING- An investment arm of Beijing's city government said it would not fund property rental firm Danke, after Reuters reported it was holding talks with the cash-strapped Phoenix Tree Holdings Ltd brand DNK.N before its partner bank stepped in to help tenants.

Sources had told Reuters earlier this week that Beijing E-town was considering becoming a major investor in the latest round of financing for Danke following protests by landlords, tenants and contractors in China's major cities. 

A crisis unfolded from early November as some landlords, who failed to receive rents from Danke in time, started to evict tenants, many of whom had borrowed from Danke's partner bank WeBank to pay off the rents for 12 months to Danke.

WeBank, backed by Tencent Holdings Ltd, said on Wednesday that it would waive interest payments and extend loans for clients affected by Danke dispute. The bank would not ask for repayment of the principal from Danke tenants until end of 2023, it said in a statement on China's Twitter-like microblog Weibo.

Beijing E-town International Investment and Development Co said in a faxed statement to Reuters on Thursday that it had never had any intention of investing in the Danke Apartment project.

"E-town never had contact with Danke Apartment project or had any investment intention," it said in the statement.

The private equity firm said the sharing economy was not an area that it would direct its investment to.

WeBank has more than 160,000 clients linked to Danke. As of Dec. 1, 40,000 of them had registered with the bank seeking loan payment extensions and interest relief as they were forced to move out.

(Reporting by Zhang Yan, Cheng Leng and Ryan Woo; editing by David Evans and Elaine Hardcastle) ((Zoey.Zhang@thomsonreuters.com;))