Non-performing loans of China's five State-owned banks accounted for 15.71 per cent of their total assets at the end of September -- compared to 20.41 per cent recorded at the beginning of the year, the China Banking Regulatory Commission said Thursday.

The improvement in the banks' asset quality is largely due to massive disposal of bad assets by the China Construction Bank (CCB), the Bank of China (BOC) and the Bank of Communications (BoComm) in June, the banking industry watchdog said in a statement.

However, the banks are facing difficulties in making further improvement during the rest of the year because some projects that were delayed and cancelled earlier this year might result in problematic loans.

The central government has been taking cooling-down measures since spring to tame overheating investment growth, which has led to the halting of many projects.

The commission says State banks' bad loans are mainly in the manufacturing, wholesale and retail, and agriculture sectors. Bad loans in these sectors account for 74.4 per cent of the banks' total loans.

Of loans granted to agricultural businesses, 48.6 per cent ended up as non-performing.

The rate for wholesale and retail companies is 39.2 per cent. The rate for hotel and catering businesses is 38 per cent.

The five State banks are CCB, BOC, BoComm, the Industrial and Commercial Bank of China and the Agricultural Bank of China.