Cinda outperformed the other three in terms of both revenue and net profit in 2010 and 2012.

Cinda's success story was partly built on the foundations of the "golden decade" of the real estate industry, which ended in about 2010. As of June 30 last year, 60.4 percent of Cinda's NPLs were related to real estate.

"Cinda was assigned to take over the NPLs of China Construction Bank Corp and China Development Bank Corp" in 1999, said Mei Xingbao, external auditor of Bank of China Ltd.

"Since CCB's bad assets were mostly generated by infrastructure construction and real estate projects, they could rise exponentially in value with careful management, thanks to soaring land and housing prices."

However, the boom times for real estate may soon end. Ye Tan, a Shanghai-based economist, said that the property market is now going through a "silver decade" as China continues to tighten its grip on the housing market.

Home prices will fluctuate only within a limited range in the future, rather than soaring by double-digit amounts, Ye said.

Andy Xie, an independent economist, has even forecast a 50 percent fall in housing prices this year.

If that were to happen, Cinda's profitability could be dragged down - but not because of fundamental changes in the way it handles bad loan disposals.

Rather, Cinda and the other AMCs would lose their dominance in the business of NPL resolution as Chinese regulators seek other ways to dispose of a rising volume of soured assets.

Those methods could include write-offs, sales on asset exchanges and setting up local "bad asset" banks. That would mean more competition to acquire bad loans.

The Ministry of Finance recently relaxed its restrictions on small loan write-offs. Loans of less than 10 million yuan to small and medium-sized enterprises that are more than one year delinquent could be written off, compared with a previous threshold of 5 million yuan.

Also, banks can write off the loans that have not been settled within two years after a borrower starts bankruptcy liquidation, compared with three years previously.

There are 20 exchanges around the country that handle NPL sales.

Bank of Tianjin Co Ltd has put more than 900 million yuan worth of NPLs for sale on a local exchange. Agricultural Bank of China Ltd has put more than 20 billion yuan in bad debts up for sale on exchanges in Tianjin, Beijing, Chongqing and Shandong. Most of those loans pre-date its 2010 IPO in Shanghai and Hong Kong.

The Ministry of Finance and the China Banking Regulatory Commission set a quota last February of one "bad asset bank" per province to purchase loans from local companies. So far, though, only Jiangsu province in the eastern region has set up such a bank.

"I believe that the government should open up the AMC market to the private sector," said Chen Zhiwu, a finance professor at Yale University. "That way, the methods of handling NPLs will become more diversified and flexible."

"The government should no longer adopt a one-size-fits-all approach to bad asset management like it did in the late 1990s," said Hu Jiye, a finance professor at the China University of Political Science and Law.

"AMCs' purchase of NPLs should be a pure business transaction among individual market players. The government and regulatory authorities should refrain from intervening."

Deng Yuanzhen contributed to this story.