Tech giants led by Alibaba’s finance affiliate are making money off the loans consumers use to buy products online. Amid surging demand from cash-strapped Chinese millennials, companies such as Alibaba’s Ant Financial have been extending more consumer loans. The firms are then packaging the debt into complex financial products that they then sell on to investors, with Ant Financial selling at least 149 billion yuan ($23 billion) of the so-called asset-backed securities this year, according to data compiled by Bloomberg and local research firm China Securitization Analytics. But the new practice is raising red flags for some analysts, who say there needs to be more transparency about how the securities, known as ABS, are created. “For this type of ABS, there are certain questions that need to be addressed,” said Jerome Cheng, a senior vice president in Hong Kong at Moody’s Investors Service. “What are the criteria based on which a lender will decide to grant loans to underlying borrowers?”
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