The finance office of Jiangsu province is planning to launch the first regional asset management company to deal with non-performing loans, according to a report.

Shanghai Securities News cited an unnamed official from the finance office as saying that the company would help control the increasing ratio of bad loans in Jiangsu province, without elaborating.

He said the asset management company would be launched by a joint organization, or one that was appointed by the finance office.

According to a measure on how to transfer and manage non-performing assets issued by the Ministry of Finance and China Banking Regulatory Commission in 2012, the provincial government is allowed to launch or appoint one asset management company to deal with regional non-performing assets.

At the moment, four State-owned asset management companies are in operation. These were launched in 1999 to buy, manage and deal with non-performing loans from State-owned banks.

Nearly 4 trillion yuan ($650 billion) of such assets had been bought by the end of 2011.

"The launch of the first regional asset management company will be a major step to deal with bad loans," said Sun Lijian, deputy dean of the school of economics at Shanghai's Fudan University.

Sun added that it is more appropriate for regional companies to take over and solve the bad loans, as the focus will be on non-performing loans from many private small and medium-sized enterprises in the province.

Chinese banks' bad loans reached their highest level in four years by the end of March, according to the China Banking Regulatory Commission on May 15, while their total assets rose by 17 percent.

Outstanding non-performing loans stood at 526.5 billion yuan, up 33.6 billion yuan from the end of 2012, while the ratio of bad loans to total lending rose by 0.01 percentage points to 0.96 percent during the first quarter of the year.

Listed banks' annual reports for 2012 and the first quarterly reports for 2013 showed that Jiangsu and Zhejiang provinces faced severe challenges on bad loans.

The photovoltaic and steel-related enterprises in Jiangsu suffered great losses in 2012, creating a large amount of non-performing assets.

"China is facing extremely high debts with a growth of 60 percent between 2009 and 2012, which should be solved as soon as possible," Liu Yuhui, an economist with the Chinese Academy of Social Sciences, wrote in the China Securities Journal on Monday.

Liu added that it is essential to restructure the debts immediately by launching long-term, low-interest bonds to buy existing bank debts.