Lawyers may be the beneficiaries of PRC Government-approved changes to help commercialise the four asset management companies charged with disposing of the jurisdiction's huge inventory of non-performing loans.

The proposed changes, endorsed by China's parliament in March, include establishing targets for the four AMCs - one for each major state-owned commercial bank - on the amounts of cash they should recover from their portfolios, limiting their expenses, improving the current bonus systems and extending AMC lifespans if targets are met.

The changes have ended speculation as to whether the AMCs would be transferred another large chunk of assets by the banks. In 1999, US$150bn in NPLs were transferred to the AMCs at book value in exchange for 10-year bonds issued by the AMCs, backed by China's Ministry of Finance. But the four state-owned banks still have over US$300bn of NPLs and are accumulating additional NPLs.

Howard Chao, a partner at O'Melveny & Myers, is advising Morgan Stanley in an NPL agreement with China Construction Bank that remains pending. He also advised the Morgan Stanley-led consortium on last year's NPL sale from China Huarong Asset Management Corporation, an ALB Deal of the Year 2003.

Chao said: "The AMCs only got one transfer of assets from the banks and that was quite a few years ago. Since then, they've been working on these assets trying to resolve them but without any further transfers.

"So the question was, who was going to take care of these NPLs. Were the banks going to directly dispose of their remaining NPLs or were they going to transfer more NPLs to the AMCs. And more NPLs could be transferred but that doesn't necessarily mean the banks won't dispose some of them themselves too," he added.

"There was some speculation that maybe the AMCs had had their day and that they might whither away or not get any more assets to justify their existence. But the latest news seems to indicate maybe they are going to get some more assets."