Two of the largest State-owned commercial banks in China recorded a significant improvement in their asset quality last year, as a combined result of several factors including the adjustment of their credit structures and acceleration of the disposal of nonperforming loans.

Industrial and Commercial Bank of China Ltd has seen a noticeable enhancement of its asset quality, thanks to continuous reforms of its credit mechanism.

The NPL ratio of ICBC, China's largest commercial lender by assets, was 1.55 percent in 2017, down by 7 basis points from the previous year, according to the bank's annual results announced on Tuesday.

"In the past few years, we have made a lot of effort to reform our credit system and mechanism. We have transformed our policies and mechanism of credit business to adapt to China's economic transition," said Gu Shu, president of ICBC, at a news conference on Tuesday.

Since 2013, the NPL ratio of the bank's new financing has been controlled at 0.89 percent, which Gu considered an achievement the bank has made through the reform of its credit mechanism.

The management of ICBC's credit and the quality of its assets are not only decided by the NPL ratio, but also influenced by many other indicators, he said.

As of the end of 2017, the balance of the bank's special-mention loans - potentially weak loans presenting an unwarranted credit risk - accounted for 3.95 percent of the total loan balance, down by 52 basis points from the previous year. The overdue loan ratio was 2.01 percent, down by 64 basis points. The disparity between overdue loans and nonperforming loans was 65.1 billion yuan ($10.4 billion), dropping by 69.2 billion yuan.

All of the improvements in these indicators have laid a solid foundation for the decrease of ICBC's NPL ratio, Gu said.

"While the new drivers of economic growth bring new opportunities for commercial banks, we are also witnessing a slowdown in growth of the old industries. In particular, we are seeing that deleveraging and de-inventory have put some pressure on banks' asset quality," said Yi Huiman, chairman of ICBC.

In the past three years, ICBC used nearly 200 billion yuan in cash to dispose of nearly 600 billion yuan of NPLs, Yi said. Last year alone, the bank collected and disposed of NPLs worth 192.7 billion yuan.

Agricultural Bank of China Ltd also stepped up NPL disposal and got rid of more than 160 billion yuan of NPLs in 2017, which contributed to a big improvement in its asset quality.

As of the end of last year, ABC's NPL ratio declined by 56 basis points year-on-year to 1.81 percent, and its NPL balance fell by 36.8 billion yuan to 194 billion yuan.

"We tightened control over credit limits for the industries with excess capacity and high risks in the past two years. The balance of loans for these industries decreased by more than 400 billion yuan during this period. In 2017, the NPL ratio of new financing was 1.26 percent, down by 55 basis points year-on-year," said Zhao Huan, president of Agricultural Bank of China.