Alibaba sold its U.S. e-commerce portal 11Main to rival OpenSky. (Photo : Reuters)
China's leading e-commerce firm, Alibaba Group Holding Ltd., recently opened a new financial business online after making a site specifically intended for auctioning off non-performing or "bad" loans.
The move comes after Alibaba inked a strategic deal with China Cinda Asset Management Co., one of the four state-owned managers of bad loans in the country.
Cinda is set to auction its bad assets worth 4 billion yuan through Alibaba's flagship online marketplace, Taobao.
"Alibaba's cutting-edge technology, massive user base and vast collection of data will help offer great opportunities for the new asset management model," Taobao president Zhang Jianfeng remarked.
Earlier in March, Cinda's Zheijang Province branch held a trial auction via Taobao and successfully sold around 55 million yuan.
Lu Weixin, head of Taobao's auction site paimai.taobao.com, said that all the procedures involved in the auction process will be held online, except for due diligence.
"Participants will bid openly against each other. This will help lower management costs, improve transparency and boost the efficiency of tackling soured assets," Lu said.
The Alibaba-Cinda partnership comes after rising concerns over bad debts, especially in the country's banking sector. The sector has experienced a fast growth rate for non-performing loans (NPL) since 2004, according to China Banking Regulatory Commission data.
The regulator stated that as of this year's first quarter, NPLs has already reached 139.9 billion yuan, a 56-percent increase from last year's figure.
Scholars have also seen the strategic collaboration as a sound plan in combatting the growing figure of NPLs in China.
"Such an effort may reach out to a larger number of financial institutions, lower transaction costs and disclose more information of the asset packages to investors informally. The bidding process may also become more transparent," Wu Qing, the deputy director of the State Council's Development Research Center, a banking research group, said.
However, Wu also noted that it will not change the bases for transactions of non-performing assets.
Meanwhile, analysts also claim that auctioning has been a significant venture for Alibaba. In its auction site, the value of goods sold increased by 1,528 percent in 2014.
In October last year, the e-commerce giant launched a platform catering to asset management. A total of 34 institutions, 14 of which are banks, have already signed up as of May.
Alibaba Group Holding's new financial business online is eyed as a vital contributory factor in facilitating the firm's growth. All processes involved in its bad-loans auction site will commence on June 20.
