China is facing a further slowdown in the disposal of bad loans with foreign investors increasingly staying away from auctions of non-performing state bank assets, the Financial Times reported.

International investors are shifting their focus away from the four Chinese asset management companies (AMCs) created to clean up the non-performing loans of the country's major banks and are instead targeting opportunities such as private equity investments and high-yield lending to real estate projects, the newspaper said.

Citing PricewaterhouseCoopers partner Ted Osborn, the newspaper said the four AMCs would find it hard to capture a major share of the estimated 10 bln usd that foreign investors in distressed debt are planning to pour into China over the next three years.

The AMCs - Cinda, Orient, Huarong and Great Wall - would not be able to sell their estimated 100 bln usd of bad loans through auctions unless they lowered prices significantly, he added.

'They have purchased many portfolios from state-owned banks over the past two to three years at prices that very well may reflect the ultimate recovery value of the underlying loans, but as they generally cannot sell these portfolios for less than they bought them for, it does not leave much room for investors to make a profit,' the newspaper quoted Osborn as saying.

Some AMCs have crowded out foreign investors by participating in rival non-performing loan auctions, while investors have also complained about moves by AMCs to sell some of the best assets to 'pre-ordained' local bidders, the newspaper added.

'The AMCs have been trying to carve up the (non-performing loan) elephant for some time, but this process is not going very well,' the newspaper quoted Robert Appleby, chief investment officer of Hong Kong investment firm ADM Capital, as saying.

Despite the government bail-out of big state lenders, some 160 bln usd of officially recognized bad loans remain in China's banking system, in addition to the estimated 100 bln usd in non-performing loans on the books of the AMCs, the newspaper said.