Taobao is no longer merely for buying socks and rice cookers.
China Cinda Asset Management, the state-owned bad-loan bank, this week auctioned off two unpaid debts on a new auction platform established by ecommerce group Alibaba on its flagship site.
The deals, while small, highlight how the marriage of technology and finance offers new avenues for dealing with what economists expect will be a rising tide of loan delinquencies as China's economy slows.
Founded in the 1990s to buy unpaid debts from China Construction Bank, Cinda now snaps up distressed assets from financial institutions, property developers and industrial groups.
Cinda sold debts owed by two factories in Zhejiang province, a prosperous hub of private entrepreneurs that is also a disproportionate source of China's bad loans.
A debt from a steel mill sold on Taobao for Rmb20m ($3.2m), while another from a factory producing brooms, candles and other light manufactures sold for Rmb4.4m.
"In the future we have a lot of this kind of debt that we plan to sell on Taobao. We were inspired when we saw courts disposing of assets this way. People are already used to this format," said Li Xiaoguang, who managed the Cinda sale for Taobao.
The face value of the debts was not clear from the listings, which included photos of factory buildings and documents describing the collateral underlying the debts. The advertising suggested that bidders were essentially buying rights to land, buildings and equipment, with little expectation that they could recover cash from debtors.
Ms. Li said the winning bidders for both debts were individuals, not financial institutions, and both debtor groups are privately owned. Bankers say debt from local governments and state-owned groups is trickier to recover given the political complexities involved with seizing state assets.
Analysts reckon Cinda and its three other state-backed brethren are already playing a key role in peeling off bad loans from commercial bank balance sheets.
Their role in buying bad loans also helps explain why China's official bad-loan ratio - which only counts assets on bank balance sheets - has remained relatively low at 1.25 per cent in spite of the marked slowdown in the economy and signs of corporate distress elsewhere in the economy.
Cinda became the first of the big four state-owned bad loan banks to go public when it raised $2.5bn in a Hong Kong initial public offering in late 2013. China Huarong Asset Management, another state-backed bad-loan bank, is expected to follow within the next year.
Taobao's auction platform goes beyond selling bad debt. Launched in February, it also includes sections for real estate, land and forest assets, machinery, private equity, intellectual property, and intangible assets.
Lenders including China Merchants Bank, Minsheng Bank, and Ping An Bank are listed as sellers.
Additional reporting by Ma Nan in Shanghai
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