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More Chinese banks are now opting to sell collateral assets directly after clients default on loans, bypassing the slow judicial auction market. Major institutions such as Agricultural Bank of China, Bank of Communications, and China Construction Bank have listed numerous properties for sale—some with over 1,000 units—based on recent data.
When borrowers fail to repay loans, banks typically initiate litigation and seek court approval to proceed with asset disposal. The collateral assets are then often listed on judicial platforms, with the sale proceeds used to settle debts. However, in a more direct approach, banks now purchase and sell these assets themselves, listing them on auction platforms.
Assets sold directly by banks tend to be more appealing to buyers because they come with clear property rights, unlike properties sold through judicial auctions, which may carry dispute risks. For instance, Alibaba’s auction platform features a ‘Bank Clearance’ section with thousands of listings. Qiqihar Rural Commercial Bank alone has listed over 100 properties—including residential, commercial, and office spaces—ranging from CNY100,000 to CNY8 million (about USD14,050 to USD1.1 million).
This method is especially popular among regional and rural banks. On JD.com’s auction platform, the Bank of Lanzhou has listed nearly 1,800 houses, Bank of Jilin more than 2,000, and Bank of Tianjin almost 1,300. The Sichuan Rural Credit System has sold over 25,000 homes, while the Liaoning Rural Credit System has moved 11,000 properties across various online platforms like Alibaba and JD.com.
Most properties listed are intended to recover non-performing loans, says a branch manager at a joint-stock bank. The original owners—either companies or individuals—used these properties as collateral when obtaining loans. When they default, the assets go into the disposal process. Recognizing that these properties are unlikely to sell quickly through judicial auctions due to market sluggishness, banks are increasingly taking ownership and selling directly. This approach, while not new, has grown significantly in scale recently.
Prices for bank-sold properties are generally much lower than those of similar second-hand homes through judicial auctions. For example, a house sold by Lanzhou Rural Commercial Bank in late September fetched CNY1.5 million, significantly cheaper than comparable properties in the same neighborhood, which typically sell for between CNY1.8 million and CNY2.2 million.
Disposing of non-performing loans through traditional methods can take over two years, and this duration is increasing in today’s market. Selling properties directly can speed up recovery efforts, according to a manager at a rural bank. Banks often need to sell assets at prices below the market average due to time constraints, and they may even lower their initial offers if they struggle to find buyers.
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