Wuliangye is one of China's premium baijiu brands. (Photo/CFP)
Due to opaque pricing mechanisms, higher convertibility to cash and its local popularity, Chinese liquor or baijiu has become an instrument for repaying debts in the city of Ordos in Inner Mongolia, a city beste by a private loan crisis.
Tian Jun (pseudonym), a local realty businessman, repaid 2 million yuan (US$326,000) of debts using liquor which he obtained by bartering a car with the manager of the local sales office of a liquor factory in Sichuan province. Creditors offered liquor were initially reluctant to accept the merchandise until they found they could use it to repay their own debts.
In a city flooded with empty new houses, a result of rampant realty speculation, many debtors have also used property to exchange for liquor. Liquor plants then convert the properties into cash by selling them at a 50% discount.
Some liquor producers have profited handsomely from the bartering. "The most popular products for bartering are baijiu with medium-to-low price tag, especially those priced below 100 yuan (US$16.30) a bottle," said Li Ping (pseudonym), local sales manager of a Sichuan distiller.
The Chinese-language China Securities Journal said that in the wake of the debt crisis, many people in Ordos — until recently the richest city in China in terms of per capita GDP due to its coal resources — have gradually come to terms with the enormous changes in their daily life. Unable to collect their debts, many creditors have gone to work at factories in order to make ends meet, despite the comparatively low wages of only 2,000 yuan (US$326) a month on average.
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