Ordos borrowers cope without cash

With local cash supplies running low, debtors in Ordos, Inner Mongolia Autonomous Region, are reportedly handing over everything from bottles of wine to entire houses to pay off their creditors.

Ordos, once a prosperous city, is now mired in debt thanks to local asset price bubbles, unrealistic government planning and a lack of real economic development.

The city has long relied on the local coal industry, which led developers and speculators to invest heavily in the city's real estate market. The government also got into the act with aggressive infrastructure build-up policies.

A collapse in coal and real estate prices back in 2012 though plunged Ordos into rapid economic decline. With the capital chain broken, credit systems disintegrated and borrowers quickly ran out of cash to pay their debts.

In this case, the people of Ordos are taking a very pragmatic approach by using goods and physical commodities to save themselves from drowning in debt. Certain creditors may be reluctant to accept the current situation, but the goods being offered now can help them minimize their losses. With local cash stocks running dry, those who refuse other forms of repayment could be left with nothing.