China widens bad banks" asset options China has given its new provincial "bad banks" a wider channel for selling assets, in an effort to strengthen their ability to handle non-performing loans. Asset management companies - established this year in the eastern provinces of Zhejiang and Jiangsu to help take bad debt off the books of local banks - will be allowed to sell these loans to buyers outside their respective provinces, according to local media reports. Initially, the Chinese banking regulator had wanted the asset management companies to confine their business within their provincial boundaries, but that made it difficult for them to sell the assets by restricting the pool of potential buyers. The broader mandate comes as China's original bad banks - the asset management companies that were formed to clean up a mountain of non-performing loans in the late 1990s - bring in outside investors and prepare to go public, in part to arm themselves with cash to buy more bad loans. Cinda, the country's biggest manager of bad debt, will list in Hong Kong next week and will raise $2.5bn from its initial public offering, having priced its shares at the top of the marketing range. It has said the fresh capital from the IPO will allow it buy Rmb100bn ($16bn) in distressed debts over the next two years. As China's economy slows and the government tries to reduce its reliance on investment-fuelled growth, banks have reported a rise in non-performing loans. Goldman Sachs forecast last month that bad loans at China's biggest banks could nearly double from Rmb593bn at the end of this year to more than Rmb1tn by the end of 2015. Jiang Jianqing, chairman of ICBC, the country's biggest bank by assets, said last month that the number of non-performing loans would increase as banks lent more money to smaller private businesses and less to state groups. As one element in its strategy for managing the bad debts, Chinese regulators last year allowed provinces to create asset management companies to buy up loans from banks. The first provincial asset management company was created earlier this year in Jiangsu, a wealthy province that has been hit by a series of business failures including the bankruptcy of Suntech, once the world's biggest producer of solar panels. The second provincial asset management company to be established was in Zhejiang, the province that is home to Wenzhou, a city that has seen scores of overleveraged small businesses get battered by the downturn. The Economic Information Daily, a paper under the state-run Xinhua news agency, reported that work was under way to create an asset management company in Anhui, a poorer central province suffering from oversupply in its property sector. The China Banking Regulatory Commission did not reply to requests for comment. Christine Kuo, a senior credit officer with rating agency Moody's, said she expected that Cinda and the other national asset management companies would play a bigger role in buying up bad debts. "These (provincial) companies will be small and will not be strongly capitalised, which means that the non-performing loans they can handle will be limited," she said. But Ms Kuo added that the move to let them sell their loans on a nationwide basis, rather than just within their provinces, would make them more effective. "They need some way to get it [the debt] out, otherwise they won't have more capacity to take on more non-performing assets," she said. Additional reporting by Emma Dong