China's Ebay Offers Customers Cheap Groceries And Defaulted Loans On Bankrupt Companies

At China's largest online retailer, TaoBao, customers can now buy literally everything from discounted groceries, apparel and pet food to defaulted loans on their favorite bankrupt steel company or that awesome condo complex in that unoccupied 'Ghost City' they've always adored. 

As an example, you could purchase this lovely snack(?)....

China

 

...or this portfolio of 118 non-performing loans from some companies in Yunnan province....

 

...or the debt of Zhejiang Hengsheng Steel Structure Co., Ltd, a steel company from Zhejiang, a coastal province in eastern China.

 

It's a win-win really...these new products offer yet another outlet to quench the insatiable gambling desires of China's populace and allows for worthless assets to once again be re-inflated courtesy of a new manufactured bubble that will ultimately come crashing down on the heads of innocent, unsophisticated investors who had no idea they were even being exploited.  It's kind of like the 2008 mortgage crisis except way more transparent.

Of course, the true intent of the online auction of these non-performing loans was beautifully, if unwittingly, summarized by the following quote from Andrew Brown, a partner for macro and strategy in Hong Kong at ShoreVest Capital Partners Ltd.  Per Bloomberg:

“The online auction sites open the marketplace up to potential buyers that may not be as diligent in the required analysis that we deem appropriate to price a portfolio,” he said. “If you are developing a platform for NPL portfolios, the question is does it allow for appropriate time and access to do the research? It’s not like buying and selling stocks.”

Yes, because everyone likes to sell their worst assets to folks who "may not be as diligent in the required analysis" to figure out what they're buying and/or how much it might be worth. 

The good thing for TaoBao is that there is no shortage of supply when it comes to non-performing loans in China.  Slowing growth and an uptick in corporate defaults has fueled the market, with NPLs at commercial banks more than doubling over the past two years to 1.6 trillion yuan as of the end of March. As Beijing pushes lenders to find market-oriented ways of dealing with soured loans, interest in distressed debt has climbed, spurring banks and asset managers to look beyond traditional venues like auction houses and exchanges to dispose of the assets.

China Cinda Asset Management Co. -- one of the country’s biggest distressed asset managers, and the firm marketing the steel company’s debt -- said last month that it’s collaborating with Alibaba to set up a special section on Taobao to auction its wares. Though Alibaba declined to provide data on actual sales, the advertising of such loans shows how interest in the market for China’s distressed debt is developing.

 

Of course, Taobao isn't the only online retailer pawning off bad debt to unsuspecting investors looking for a good 'get rich quick' scheme.  There are more than 50 other websites marketing their services to banks and other sellers of bad loans that have emerged in China in the first half of last year, according to a March report from PricewaterhouseCoopers LLP. More than 20 financial institutions are listed as partners on Taobao’s auction platform for soured assets, including Shenzhen-based Ping An Bank Co., Beijing’s China Minsheng Banking Corp. and China Citic Bank Corp.

Selling completely illiquid, defaulted loans to unsophisticated individuals with no idea of what they're buying and/or what it's worth but merely looking to get their daily gambling fix...what could go wrong?

Comments

Bemused Observer Tue, 07/11/2017 - 14:21 Permalink

Hey, that snack looks good...500 years of fermentation, mmmmm! This would be a great time for a clever entrepreneur to reverse the trends of the past few decades and start flooding the Chinese (and other) markets with moderately-priced goods of slightly better quality than what is currently out there. Competing on price alone has its limits...you can only go so low. But quality can always be improved at cheaper costs over time, and THAT'S where a smart person could begin to re-take markets long abandoned to mass-production by international companies. Those markets have been saturated with ever-cheaper and crappier versions of products for years, those customers are hungry for some actual QUALITY. They are so ready to be surprised with an appliance or device that actually WORKS as described, and continues to work for weeks, months, and years. It doesn't have to be hi-tech, or expensive, in fact, reliability without all the bells and whistles is cheaper to manufacture than the fancy shit, and is customer-serviceable, which is another big plus.That 'clever entrepreneur' would also do well to invest in a chain of 'parts' stores for the items he sells, so he can own the fix-it market on his shit as well. Imagine being the seller of simple, mechanical washing machines with all user-serviceable components on the day that the last customer takes a sledgehammer to the digital monstrosity that has GPS, can connect to the internet, tell him the time in any zone on the planet, alert him to the need for service, but WILL NOT WASH HIS CLOTHES? This customer will likely fall to his knees and weep openly when he finds your store... Well, everything old is new again...I expect the day will come when Apple will 'develop' smart phones that utilize landlines to make hacking more difficult, and Amazon utilizing vacant mall properties to sort and store all the different goods they sell and opening them to the public in case they want to just come get the stuff instead of ordering it online...they can call Uber, which will send one of their fleet of marked cars (one of the things they agreed to after the Great Auto Insurance Claims Fiasco of 2018..) to pick them up and drive them there.

Hongcha Tue, 07/11/2017 - 15:33 Permalink

Interesting article; more of the same, ZH !  Take a cue from chinasmack ... the region is fascinating and horrifying in an amusing way!