FROM shoes to furniture and cosmetics to cars, shoppers in China can find just about anything on Taobao, the country’s biggest online marketplace. They now have one more category to choose from: distressed assets. Cinda, a state-owned bank set up to manage non-performing loans, will launch an auction on Taobao later this month of bad debts with a face value of 4 billion yuan ($646m)—backed by collateral such as bankrupt factories and even unused mines. As the economy slows, such debts are piling up. This innovative technique may help the state to offload some of them.
Bad loans in the Chinese banking system reached more than 982 billion yuan at the end of March, more than double their level three years earlier. Non-performing loans are only about 1.4% of the total on banks’ books, reportedly. But this ratio would have been higher were it not for banks shuffling off their dud loans to Cinda and China’s three other asset-management companies (AMCs).
Established 15 years ago, the AMCs were initially treated as an expedient way of cleaning up banks’ balance sheets. Bad loans accounted for about a quarter of banks’...Continue reading
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