China's new yuan loans posted their deepest contraction on record in July, as weak household credit demand and seasonal factors weighed on lending in the world's second-largest economy, according to Reuters calculations based on data released by the People's Bank of China (PBOC) on Friday, August 14.
New yuan loans fell by 340 billion yuan (about 50.4 billion US dollars) last month, the largest decline on record and the second contraction of the year after April. Analysts polled by Reuters had expected an increase of 45 billion yuan, after 1.61 trillion yuan in June. The PBOC does not publish monthly breakdowns: Reuters calculated the July figure from central bank data.
Household loans, including mortgages, shrank by 460.3 billion yuan in July, after a rise of 264.6 billion yuan in June, while corporate loans fell by 130 billion yuan, after a rise of 1.5 trillion yuan, according to Reuters calculations. New loans totalled 10.38 trillion yuan in the first seven months of 2026, down from 12.87 trillion yuan in the same period a year earlier.
The stock of outstanding yuan loans grew 5.1 percent in July from a year earlier, a record low, down from 5.2 percent in June and below the market consensus of 5.3 percent, Reuters reported. Broad M2 money supply rose 7.7 percent year on year, a 16-month low, missing the 7.9 percent forecast and easing from 8 percent in June. Outstanding total social financing grew 7.4 percent year on year, unchanged from June.
"The weakness in loan demand comes despite the fact that nominal bank lending rates have continued to edge down. The recent uptick in inflation means that, in real terms, bank lending rates have fallen sharply this year," Capital Economics said in a note. The consultancy said the PBOC "doesn't seem particularly worried about the recent weakness in the credit data" and still expects around 30 basis points of rate cuts over the coming year.
The weak credit figures follow the pledge by China's top leaders, made last month, to bolster growth by accelerating fiscal spending on already approved infrastructure projects through year-end rather than planning major new stimulus. On Wednesday, August 12, the PBOC said it would maintain an appropriately loose monetary stance and roll out practical, effective measures as needed, without signalling explicit cuts to policy rates or to banks' reserve-requirement ratio, Reuters reported.
The PBOC-backed Financial News said investors should look beyond bank loans and assess financing alongside bond issuance and other funding channels: in 2025, loans accounted for 45 percent of the increase in total social financing, while bond and equity financing combined made up 47 percent, surpassing loans for the first time. Caixin Global, citing official data, reported that new yuan loans fell by 340 billion yuan in July, far below the increase of 126 billion yuan expected in a Caixin poll of economists, and that total social financing rose by 1.4 trillion yuan in the month, supported by 1.32 trillion yuan in government bond issuance.
Sources
- Reuters (via AT&T Currently): [China July bank loans post record contraction as credit demand falters](https://currently.att.yahoo.com/att/china-july-bank-loans-contract-093218775.html)
- Caixin Global: [China's New Bank Loans Shrink in July as Borrowing Demand Stays Weak](https://www.caixinglobal.com/2026-08-15/chinas-new-bank-loans-shrink-in-july-as-borrowing-demand-stays-weak-102474332.html)
