Paul Hastings has advised China Orient Summit Capital – an offshore investment management platform created by China Orient Asset Management and its unit, China Summit Capital – and U.S.-based buyout firm KKR on a strategic partnership to capitalise on the growing Chinese market for distressed debt, specifically in the real estate sector.

China Orient is one of only four licensed state-owned asset management companies and wholesalers of non-performing loans (NPL) in the country.

A cross-border team from Paul Hastings team handled the deal, led by Hong Kong-based partners Vivian Lam and Pei Fang and London-based partner Garrett Hayes.

China's distressed debt market has been dominated by the Big Four asset management firms such as China Huarong Asset Management Co and China Cinda Asset Management Co.

But there have been signs that overseas investors are looking the rapidly expanding market, as slowing growth for the world's second-largest economy pushes more borrowers into default. Many borrowers use property, including factories and buildings, as collateral.

Goldman Sachs Group and Oaktree Capital Group were among 120 institutional investors attending a $7 billion bad debt portfolios offering by China Cinda last May, the largest ever sale promotion of the state-owned distressed debt manager.

Non-performing loans (NPLs) at Chinese commercial banks grew 36 percent to 1.95 trillion yuan during 2015, and marked their 17th consecutive quarter of increase.

China's property market, with a vast amount of unsold apartments, mainly in smaller cities, has been a major source of troubled loans.

The sector had more than 20 trillion yuan ($3 trillion) of outstanding loans from financial institutions at the end of the third quarter last year, accounting for 22 percent of total yuan-denominated loans, data from the central bank show.