Analysis | Beyond Hello Kitty: Taobao emerges as prime platform for bad loans

Taobao, China’s biggest online shopping platform, is hawking off a bit more than Korean cosmetics and Hello Kitty socks these days.

The site, owned by Alibaba Group Holding, has become China’s premier venue for selling toxic assets directly to anyone looking for claim on bad debt from a make-up factory in Jiangsu province or a drug factory in Zhejiang.

China Huarong Asset Management, which went public in Hong Kong last month and is one of four state-backed “bad banks”, said this week that it plans to sell off 51.5 billion yuan worth of bad debt via Taobao.

The bad loans, bought off Chinese banks in Zhejiang and Jiangsu, would be sold across mainland China.

READ MORE: Bad-debt investment products present new risks in China

China Cinda Asset Management, another state-controlled bad-debt manager, was the first firm to sell distressed debt on Taobao’s auction platform. In March, the Zhejiang branch of the company sold off two bad debt contracts on a Taobao page for a total 24.5 million yuan. The two contracts sold in eight hours, after garnering a combined 7,978 views. The company said in May that it would sell 4 billion yuan on the platform.

An auction manager at the time told the South China Morning Post that Cinda was positioning to make the platform a long-termsolution for bringing to the market the huge amount of bad debt accumulating in China’s banking system.