China's four state-owned asset management companies have set out to collect 29.5 billion yuan (about HK$27.69 billion) in cash this year from the disposal of non-performing loans (NPLs) taken over from the four state-owned commercial banks, according to Xinhua. The ambitious target, accounting for 43.7 per cent of the cash collected by the management companies in the past three years, was unveiled as scepticism mounted over the management companies' effectiveness in tackling China's increasing bad-loan problem. The four management companies including Cinda, Huarong, Great Wall and Orient, were set up in 1999 to shelter China's four state-owned commercial banks - the Industrial and Commercial Bank of China, Bank of China, China Construction Bank and the Agricultural Bank of China. The firms' track record over the past three years has led to differing opinions among analysts on whether the management companies will be able to resolve the banks' close to 1.39 trillion yuan bad-loan situation during the 10-year mandate they were given at the start. Official data shows the management companies disposed of 301.4 billion yuan in bad loans, or just over 21 per cent of the loans on their books, by the end of last year. Assets recovered, including cash and other property, were valued at 101.3 billion yuan, or 33.6 per cent of the disposed problem loans, vague figures that did not explain the nature or valuation methods used for the assets recovered, according to Ted Osborn, a Hong Kong-based partner in the corporate finance and recovery arm at PricewaterhouseCoopers. The firms had collected 67.4 billion yuan in cash from bad-loan disposal over the three years, representing a cash recovery rate of 22.3 per cent. The low recovery rate suggested heavy losses to be borne by the Ministry of Finance, and likely to be shared by the four banks which were still burdened with a bad-loan ratio of more than 20 per cent, a report by ratings agency Fitch said. 'I would assume also that the first few batches of NPLs should be of a much better quality than the remaining NPLs,' said Fitch's China analyst Arthur Lau. 'The recovery rate will deteriorate going forward.' An inadequate legal framework has been among the factors hindering the recovery of bad loans. Only last week, Cheng Siwei, vice-chairman of the Standing Committee of the National People's Congress, told the Financial Times that Beijing might need another five years to amend its 16-year-old bankruptcy law. Previous reports suggested the amendment, in the works for eight years now, would help NPL recovery by allowing creditors to petition for the bankruptcy of all types of companies, for debt default.