China money supply Negative loan growth points to soft private demand

Research evidence excerpt

China money supply Negative loan growth points to soft private demand

Economics ● China

14 May 2026

Implications

China’s credit data was dragged down by weaker private demand as new yuan loans contracted by RMB10bn (Bbg: +RMB300bn) in

April, the second such instance of a m-o-m contraction within a year, the last time being in July 2025. Meanwhile, TSF was still

supported by government bond issuance, though the lower lending print meant TSF also missed expectations (RMB621bn, Bbg:

RMB1,250bn).

The slowdown in credit demand reflects still subdued confidence. However, the increased potential for broader passthrough of

imported inflation may dampen hopes for further PBoC cuts (we expect policy rates to stay on hold). Overall, the PBoC is likely to

maintain a “moderately loose” monetary policy stance, as indicated in the recent Q1 Monetary Policy Implementation Report, though

we expect the support to come primarily through liquidity channels and structural monetary tools.

Relatedly, the PBoC’s Monetary Policy Implementation Report (Q1 2026) also points to the shift in China’s financing mix now, with

the share of bank lending declining as bond financing becomes more prominent. Local debt swaps, risk resolution at small and

medium-sized banks, and ongoing economic restructuring also created a temporary drag on credit growth (PBoC, 12 May).

April’s credit data looks to be a bit of a repeat of last July (13 Aug 2025). On the corporate side, bill financing – sometimes used to

“window-dress” actual lending figures – largely outperformed, but both short-term and longer-term corporate lending contracted.

Short-term lending may have some seasonal impact, but the decrease in longer-term lending was unexpected (chart 1). Some of the