China Is Said to Be Relaxing Rules to Tackle Corporate Debt by Reuters @FortuneMagazine October 24, 2016, 3:06 AM EST E-mail Tweet Facebook Linkedin Share icons China’s banking regulator plans to allow local governments to set up more asset management companies (AMCs) as part of a broader effort to manage corporate debt and reduce the growing volume of troubled bank loans that pose a risk to the economy. The China Banking Regulatory Commission (CBRC) is relaxing rules that only allow one local AMC per province, three sources told Reuters. The new measures are also expected to lift restrictions on how the local asset managers deal with the debt they acquire. They can now sell non-performing assets to other companies and there are now no geographical restrictions on the buyer, the sources said. The CBRC could not be reached for comment. The news was reported earlier by local media. When considering whether to set up a local AMC, a provincial government should consider the volume of soured debt and the pressure to handle such loans, said the CBRC, according to the sources. China is turning to a widening array of schemes to manage its worsening debt situation. The State Council earlier this month introduced guidelines aimed at lessening corporate leverage through the introduction of debt-to-equity swaps and increased use of debt securitization. The latest steps come as a slowdown in the world’s second-largest economy has raised worries among policy makers and analysts that the country’s heavily-indebted corporate sector will struggle to deleverage. For more on business in China, watch Fortune’s video: “CBRC loosened these restrictions because they need a platform to follow through new policies such as the debt-to-equity swap,” said one source. Banking regulators are under added pressure as troubled lending continues to mount. The total volume of non-performing loans (NPLs) at Chinese commercial banks reached 1.44 trillion yuan ($217 billion) at the end of June, the highest in 11 years, according to CBRC data. Special mention loans, or credit that may sour quickly, amounted to 3.32 trillion yuan for the same period. The mood at a recent quarterly analysis meeting convened by the CBRC wasn’t optimistic, one source said. There are currently 28 local AMCs in China.