Under the proposal, the Ministry of Finance will move its stakes in China Cinda Asset Management Co, China Great Wall Asset Management and China Orient Asset Management to Central Huijin Investment, the report said citing people familiar with the matter.

Calls to China Cinda, China Great Wall, China Orient and Central Huijin Investment for comment were not answered. China Investment Corp., parent of Huijin, did not immediately reply to requests for comment sent by email.

China established the three asset management companies (AMCs) and China Huarong Asset Management Co in 1999 to help handle bad loans from the country's four largest state banks, which were facing an insolvency crisis.

But the distressed asset managers expanded beyond their initial remit, posing risks to the financial system. In a government-orchestrated bailout in 2021, troubled Huarong saw Citic Group overtake the finance ministry as its largest shareholder.

(Reporting by Shivani Tanna in Bengaluru and Ziyi Tang in Beijing; Editing by Jacqueline Wong and Kim Coghill)