China’s e-commerce giant Alibaba has found a number of innovative ways to expand during China’s economic slowdown. Its latest offering is in an area that analysts agree is growing rapidly: bad debts at Chinese steel mills.

China Cinda Asset Management, which specialises in buying bad debt from Chinese financial and industrial enterprises, has posted debt from a steelmaker on Alibaba’s new auction site on its Taobao platform.

Zhejiang Zhongyi Special Steel defaulted on Yuan 47.32 million ($7.6m) of debt, including interest, on 30 November last year. In a move common among China’s overcapacity industries, the loan was secured with assets from a superficially unrelated company, Zhejiang Ruijin Copper and Aluminium.

The auction is essentially for land use rights to 6,475.06 square meters of land and an empty industrial facility on the site in Wenzhou, according to the auction platform. The debt was reportedly sold to a private bidder for Yuan 20m, not a cent above the reserve price, Kallanish notes.

In this case, the bidder pays the Yuan 20m to take over the role of the lender, so the debt is then owed to the winning bidder. The assumption is that the debt will never be repaid and the bidder can take possession of the land and industrial facility in Wenzhou, which is thus being used as collateral.