Two state-owned asset management companies with the worst track records of disposing non-performing loans (NPL) are said to be in talks to buy more than 100 billion yuan in doubtful loans from China Cinda Asset Management, the most successful asset manager. A source said on Tuesday that China Great Wall Asset Management and China Orient Asset Management Corp were negotiating the purchase of 128.9 billion yuan in NPLs Cinda acquired in June from China Construction Bank (CCB). An agreement was expected soon, the source said. Analysts see the move as an attempt by the two laggard asset managers to improve their portfolios, as the government considers proposals to close or merge one or more of the four managers amid reports of waste and corruption. China Orient and Great Wall inherited most of their NPLs from the Bank of China (BOC) and the Agricultural Bank of China, respectively, when they were first set up to help clean up the sector in 1999. Cinda's CCB loans, while categorised as 'doubtful', are newer and therefore have a better chance of recovery. Cinda is looking to resell 30 per cent of the 278.7 billion yuan in NPLs it acquired from BOC and CCB in June by the end of next month, according to former Cinda chief executive Zhu Dengshan. The four asset managers had bid in the June auction to become the first wholesaler of NPLs. The prize was a batch of BOC and CCB doubtful loans - the second-worst category after 'total loss'. Maintaining all four asset managers, with thousands of people on their payrolls, proved a costly approach to addressing the banking crisis. Results of probes by the National Audit Office, due for publication in January, were expected to highlight excess and corruption among the asset managers, western analysts said. As the number of viable NPLs awaiting disposal dwindles, rumours have circulated that one or more of them will be folded. The finance ministry, however, appears more likely to let the market determine when and how the sector consolidates. Officially, the asset managers were given until 2006 to dispose of 1.39 trillion yuan in NPLs transferred to them in 1999, with each responsible for one state-owned commercial bank. Beijing has since freed the four managers from the constraints of their original mandate, allowing them to trade NPLs among themselves and compete for new business. Great Wall and Orient posted the worst performances, in part because their original NPLs were of such poor quality. They have disposed of 55.3 per cent and 54 per cent of their 1999 NPLs by the end of September, respectively, against Cinda's 63.5 per cent and China Huarong Asset Management's 69.4 per cent. Great Wall's cash recovery rate was 10.56 per cent, less than a third of Cinda's 33.2 per cent. 'They haven't done anything in a grand scale,' said a western analyst of the paucity of successful Great Wall NPL auctions. Eager to demonstrate some measure of success, Great Wall recently announced a plan to sell all its 150 billion yuan of 1999 NPLs in a single package.