China continues to wrestle with city and provincial bad debt problems, an issue that has raised concerns about the robustness of the world’s second-largest economy.

China continues to wrestle with city and provincial bad debt problems, an issue that has raised concerns about the robustness of the world’s second-largest economy, a report has said.  

The Mainland’s bank regulator has given the green light for a second group of local asset management firms to be given the job of sorting out debt at the city and provincial level, bringing the number of formally approved local “bad banks” to 10, according to the South China Morning Post.

The measures are a part of how the country is trying to restructure what is seen as an opaque and potentially vulnerable state-run financial system, amid concerns that a sharp fall in sectors such as real estate could cause a hard economic landing.

China Banking Regulatory Commission approved governments in Beijing, Chongqing, Tianjin, Fujian and Liaoning to set up asset management companies, the report said, citing the state-backed Economic Information organisation. The second wave of approvals comes after Zhejiang, Jiangsu, Anhui, Guangdong and Shanghai established local-government controlled firms in July, it said.

The report said the local companies are modelled after four centrally controlled asset managers which bought bad debt from China’s four biggest banks.  The local AMCs will have a similar role in buying up bad debt. On this occasion, but this time they will buy the debt from China’s local governments.