China Huarong Asset Management Co Ltd will increase the size of bad assets disposal and reorganization in 2016 amid the Chinese economic downturn, said Lai Xiaomin, chairman of the largest asset management company in China.

"The financial risk will become more prominent next year with a possible increase in company default rates and a decline in returns on bad assets disposal, which requires us to improve our risk management and pricing power. We’ll step up the efforts in handling nonperforming assets, but it will be more difficult for us to make money," he said at a news conference on Thursday.

As of June 30, the outstanding nonperforming assets disposal of China Huarong reached 34.6 billion yuan ($5.34 billion) and its bad assets reorganization hit 212 billion yuan.

Statistics from the China Banking Regulatory Commission showed that the outstanding nonperforming loans of commercial lenders increased to 1.19 trillion yuan by the end of September, compared with 766.9 billion yuan a year earlier. The average NPL ratio rose 43 basis points to 1.59 percent. The outstanding special-mention loans, potentially weak loans or assets presenting an unwarranted credit risk, also went up from 1.84 trillion yuan to 2.81 trillion yuan during the same period.

Wang Lihua, vice-president of China Huarong, said the company will strengthen the effort in purchasing and reorganizing special-mention loans to help companies ease the liquidity problem and help commercial banks lower their NPL ratios.

The company announced on Tuesday that it put 51.5 billion yuan of nonperforming assets up for sale on Taobao, an online marketplace founded by the Chinese e-commerce giant Alibaba Group Holding Ltd.

The bad assets are mainly clustered in the Yangtze Delta River and Pearl River Delta regions, with 60 percent of the total coming from Zhejiang, Jiangsu and Guangdong provinces, involving 2,360 debtors in multiple sectors.

Hu Ying, president assistant of China Huarong, said 30 percent of the bad assets came from the wholesale and retail sector, 25 percent from the textile, pharmaceutical and chemical engineering equipment manufacturing sectors, 6 percent from the coal and oil sectors, and 4 percent from the construction sector.

Nonperforming assets with collateral and guarantees accounted for 97 percent of the total.

Hu said: "Our original intention is to step up the efforts in handling bad assets with an innovative mindset. The cooperation with Taobao allows us to communicate directly with institutional and individual investors via the online platform, thus improving the efficiency of financial services and further expanding our channel of customer acquisition."

With its total assets reaching nearly 800 billion yuan, China Huarong raised 19.7 billion Hong Kong dollars ($2.54 billion) through an initial public offering in Hong Kong on Oct 30 at a price of HK$3.09 per share.