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IN DEPTH: Massive Online Auctions
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Massive Online Auctions
A Modern Way to Reach Customers for Boeings and Luxury Apartments

BT 201808 In depth 01现如今,淘宝在大众眼中已成为“万能的淘宝”,无论是日常用品,还是代工帮忙,甚至是每天发晚安短信都可以成为淘宝业务,但是你听说过在淘宝上交易飞机的吗?其实这早已不是什么新闻,在去年11月,我国首次通过网络平台,即淘宝,将三架波音747飞机进行了司法拍卖。在分别经过26次和27次竞价后,最终由顺丰航空以3.2亿余元人民币(6540万新元)竞得其中两架货机机身及八台发动机。这三架波音747货机被挂上网络平台淘宝拍卖时虽然门槛高,但不缺竞拍者。前后共有5000多人设置拍卖提醒,近80万人次围观。

首次线上拍卖大获成功,影响广泛。而除了巨额商品拍卖,淘宝上还有大量价值上亿元的不良债权和房产等相关抵押物被作为商品交易流通。淘宝的便利性则方便了个体买家进入市场,你只需在账户中存入一定数量的金额,即可参与拍卖。如果出价不成功,存款仍可退回。部分银行和资产管理公司则利用淘宝平台大量出售不良贷款和债务,兴业银行、平安银行、四大资产管理公司、浙商资产等超过20家金融机构曾在网上拍卖不良债权资产,当时处于预览和竞拍中的起拍价合计已经超过10亿元人民币。其中既有包含多个债权的报价过亿的不良资产包,也有单个债权,还有作为债权抵押的实物资产,比如位于浙江绍兴的一栋别墅。对此,有专家认为,中国的金融科技和电子商务已经发展到了很高的水平,足以提高不良资产拍卖的效率和公平性,且为投资者提供了公平的竞争环境。但值得注意的是,购买不良资产毕竟不同于向开发商购买房产,或向银行购买理财产品,需要包括尽职调查、资产评估、法律执行等专业能力。在买卖过程中,用足够的信息和时间做调研是非常必要的,没有专业能力的个人投资者需要借助和依托外部机构的专业代理服务,但这些配套还有待完善。

总体来看,虽然目前在线拍卖成效已达历史最佳水平,但相关金融监管力度与法律制度本身尚需完善,不良贷款等问题对政府部门和交易商家而言都是巨大的挑战。

Ever wanted to buy a Boeing online? You can do so in China. Chinese banks and companies are offloading assets worth billions of dollars via online auctions, and local governments are following suit. The large problem of non-performing loans which arose as a consequence of economic slowdown pressured Chinese companies to find new ways for selling loan collaterals. One of those ways which proved extremely efficient is online auctions, mainly operated by the Chinese online shopping website Taobao.
 

Taobao, the e-commerce platform owned by Alibaba Group, has more than 600 million monthly active visitors. Taobao is one of the world’s largest e-commerce websites, ranked among the top 10 most visited websites in the world, and it was launched in 2003 and soon became the undisputed leader of Chinese online shopping market. As a result, eBay had to leave the Chinese market and closed its site in China in 2006.
 

Majority of the Taobao’s listings are new merchandise sold at fixed prices, but users can also choose to make an online auction instead. This feature of online auctions has recently been used by Chinese banks and companies to sell everything from Boeings 747s to luxury villas - mostly collaterals of non-performing loans. On each 20th of every month, local governments can also use the site’s auction feature to reach hundreds of millions of potential buyers. For many businesses, online auctions proved to be more effective than offline versions.

BT 201808 In depth 02Two Boeings 747 sold at Taobao auction

Bad Debt in China on the Rise

Chinese commercial banks are experiencing a rising pile of non-performing loans since 2013, which stood at almost $250 billion last year. The debt problem of Chinese banks and companies started with the economic slowdown and the inability of companies to return their borrowings. The following chart shows the non-performing loan ratio (NPL ratio) of Chinese banks.

BT 201808 In depth 03Chart: Non-performing loans ratio in China.

As a result, bad debt management companies such as China Cinda Asset Management had to reach out to online auctions to sell massive amounts of non-performing debts to the market. Number of bankruptcies has also been rising steadily since 2013, adding up to almost 5,000 bankruptcy cases in the first half of 2017. This has led to a massive amount of assets seized by Chinese banks and courts which are now being sold through Taobao’s online auction system.
 

For example, the Hong Kong-based China Cinda Asset Management is using Taobao’s online auction system to sell bad debt from two Chinese steel makers to the value of 530 million Yuan ($81 million), and China’s Hua Xia Bank is auctioning off an apartment in Guangdong for 645,000 Yuan ($98,000). Another interesting auction involves two Boeings 747, which were sold in an auction on Taobao for $42 million, after a series of unsuccessful attempts to sell them via traditional offline auctions. The Chinese logistics firm S.F. Express bought the two planes which were previously owned by Jade Cargo International.
 

Online Auctions are Free to Join

Anyone can join Taobao’s auctions by opening an account, providing a national ID and depositing a certain amount to bid at the auction as required by the seller. If the bid is unsuccessful, the initial deposit will be returned to the buyer’s account within three days. The fact that Taobao is owned by Alibaba Group ensures that large transactions are processed seamlessly and that the entire necessary infrastructure in terms of technology and payment is in place.
 

Local Governments Could Increase Their Presence on Taobao

Chinese courts have completed more than 610,000 online auctions since 2012, selling more than 460 billion Yuan ($70 billion) in assets on Taobao, according to Xinhua News Agency. A Nantong-based court sold seized assets worth around $364 million during the first half of 2017 alone, which represents a whopping rise of more than 300% as compared to the same period in 2016.
 

With the volume of bad loans steadily on the rise since 2012, one could expect that local Chinese courts will increase their presence on online auction sites in future to sell frozen and seized assets.

BT 201808 In depth 04Bad loans in China increasing since 2012

There are Certain Risks for Retail Investors

With the staggering rise in value of online auctions, average retail investors could be wondering whether they should jump in and catch a bargain. However, according to Oliver Rui, a professor of finance at the China Europe International Business School in Shanghai, distressed assets are harder to analyze and trade as compared to investing in the traditional stock and bond market. “Distressed assets come with a lot of problems,” Rui said. “They are definitely not standard trading products for the public to invest in.”
 

Summary

While online auctions reach record-levels, China’s financial regulations and legal systems remain big challenges not only for professional bad debt managers, banks and companies, but also for Taobao itself. On the other hand, Chinese companies are expanding their activities in all sectors of the economy and could easily require additional assets which could boost the value of online auctions and extend their uptrend. In any case, as long as non-performing loans remain a challenge for the Chinese financial sector, potential buyers should be prepared to enter the online auction market and look for another bargain.

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