China should consider setting up more provincial asset management companies to strip off bad assets in the expanding local financial sector and to guard against risks related to local governments' debt, experts said.

"With an increasing number of local banks and village banks, it's necessary to have more asset management companies at a provincial level to help handle their growing non-performing assets," said Zhao Quanhou, head of financial research at the Fiscal Science Research Center, which is affiliated with the Ministry of Finance.

He said such local companies would be complementary to the "Big Four" national AMCs, which deal mainly with policy banks and major national banks.