* Venture has already invested in one deal - source
* Sector dominated by China Big Four asset management firms (Adds details of venture)
BEIJING/SHANGHAI, Jan 22 (Reuters) - KKR & Co said it had partnered with one of China's biggest state-owned bad debt managers to take advantage of opportunities in the country's growing market for distressed debt, particularly in the property sector.
In a sign of growing foreign interest in Chinese distressed debt, the U.S. buyout firm has set up a venture with two units of China Orient Asset Management Co, one of the country's Big Four asset management companies.
The venture will provide flexible capital solutions, particularly in the real estate sector, Edward Han, managing director at one of the units, COS-Capital, said in a statement.
It has already invested in one deal, a person familiar with the matter told Reuters, declining to be identified as the person was not authorised to speak about the issue.
Further details about the venture were not immediately available.
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.
($1 = 6.5782 Chinese yuan) (Reporting by Shu Zhang in BEIJING and Engen Tham in Shanghai; Additional reporting by Matthew Miller; Editing by Edwina Gibbs)