New Yuan Loans Contract Most on Record

Net new yuan loans extended by Chinese banks fell by CNY 340 billion in July of 2026, the sharpest contraction on record, and contrasting from market expectations that they would increase by a net CNY 45 billion. Borrowers repaid 590 billion yuan of loans to the real economy, the most since 2002. The softening trend in new loans remained in trend as a slowing economy and poor consumer sentiment, particularly for housing, limited demand for credit. The swing also reflects the downturn for traditional sectors of the economy into tech, which commonly raises cash in the bond market instead of bank loans. Consequently, aggregate financing, a broader measure of credit, was at CNY 1.41 trillion, although a large portion of the increase was from the issue of government bonds. With that, outstanding loan growth grew 5.1% annually, slowing from the 5.3% rate from the previous month.

China’s banks extended CNY 1610 billion in new yuan loans in June 2026, higher than CNY 520 billion in May, but well below CNY 2238 billion a year earlier and forecasts of CNY 2000 billion. Household loans including mortgages, increased by CNY 264.6 billion after a CNY 141.2 billion in May and corporate loans rose to CNY 1.5 trillion from CNY 640 billion. Credit growth typically accelerates in June as banks step up lending activity to meet their quarterly targets, but loan demand remains subdued. Considering the first half of the year, new yuan loans totaled CNY 10.72 trillion, less than CNY 12.92 trillion in the same period in 2025. Meanwhile, total social financing, which is a broad measure of credit and liquidity in the economy, rose by a net CNY 3.36 trillion, less than CNY 4.22 trillion last year and expectations of CNY 3.77 trillion. Loan growth also slowed to 5.2%, a new record low since at least 1998, down from 5.5% in the previous period and 7.1% a year earlier.

New yuan loans extended by Chinese banks rose by a net CNY 520 billion in May of 2026, slowing from the CNY 623 billion from the corresponding period of the previous year, and loosely aligned with market expectations of a net CNY 550 extension. The result marked the rebound from the unexpected domestic bank loans contraction in the previous month. In the meantime, aggregate financing, which is a broader measure of credit, rose by a net CNY 2.03 trillion, less than the CNY 22.9 trillion from last year but still above market expectations of CNY 1.87 trillion. Despite pointing to some resilience following the sharp slowdown at the start of the year, the figure continued to underscore the decline in the issuance of new bonds from the central and local governments in China, aligned with lower credit demand as Chinese consumption remains sluggish.