Chinese bank lending jumped in January compared with the prior month but failed to meet market expectations and remained well under last year’s peak, underscoring persistent weakness in credit demand across the economy.
According to data from the People’s Bank of China, banks issued 4.71 trillion yuan in new yuan loans in January, up sharply from 910 billion yuan in December. The January tally fell short of the 5.0 trillion yuan forecast in a poll of analysts and was below the record 5.13 trillion yuan recorded in the same month a year earlier.
Credit often spikes in January as lenders front-load lending at the start of the year to compete for higher-quality borrowers and market share. However, short-term corporate financing needs may have been weaker in January this year compared with the same period last year because the Spring Festival holiday occurred later, in mid-February.
"China’s credit data for the first month of 2026 came in with mixed signals. Aggregate financing exceeded expectations, while new loan growth slightly undershot consensus," said Zhou Hao, chief economist at Guotai Junan International. Zhou noted that the share of new loans in total social financing has continued to decline, remaining below 50% through much of the second half of 2025, a sign that government-driven funding is increasingly driving credit growth.
"We expect this trend to persist through 2026, with fiscal policy remaining expansionary and the fiscal deficit likely staying above 4% of GDP in the new year," Zhou added.
Activity data for January painted a subdued picture. An official business survey showed factory activity faltered, reflecting the seasonal slowdown among certain types of manufacturers and weak domestic demand. While reported economic growth reached the official target of around 5% last year, buoyed by an export surge, structural imbalances, trade tensions and mounting geopolitical uncertainty present risks to the outlook. A forecast showed economic growth is likely to slow to 4.5% in 2026.
New bank lending for the full year 2025 fell to 16.27 trillion yuan, a seven-year low, reflecting weak credit appetite as a prolonged property sector downturn and soft household spending weighed on both business and consumer confidence. Policymakers have indicated readiness to step up stimulus measures this year, while the central bank has said there is room to cut banks’ reserve requirement ratios and broader interest rates. Authorities also implemented cuts to sector-specific interest rates last month.
The composition of January lending showed divergent moves across borrowers. Household loans, including mortgages, increased by 456.5 billion yuan in January after contracting by 91.6 billion yuan in December. Corporate loans expanded sharply to 4.45 trillion yuan from 1.07 trillion yuan, based on calculations drawn from the central bank data.
Beijing has been pursuing measures to spur consumption and reduce the economy’s dependence on exports and investment. The combination of weak household spending, persistent deflationary pressures and the extended crisis in the property sector have damped growth, prompting officials to lean toward supportive fiscal and monetary actions.
Monetary aggregates also moved higher in January. Broad M2 money supply grew 9.0% year-on-year, exceeding analysts’ 8.4% forecast in the poll. By comparison, M2 grew 8.5% in December. The narrower M1 measure rose 4.9% in January, up from 3.8% in December.
Outstanding yuan loans increased 6.1% year-on-year in January, a record low pace and slightly slower than the 6.4% growth recorded in December. Analysts had expected 6.2% growth in outstanding loans. Outstanding total social financing, a broad gauge of credit and liquidity, rose 8.2% year-on-year in January, modestly down from 8.3% in December.
Analysts said any acceleration in government bond issuance could lift total social financing, since the TSF measure captures off-balance-sheet financing such as initial public offerings, bond sales and loans from trust companies.
"A pick-up in credit growth thanks to fiscal easing meant the PBOC was able to largely stay on the sidelines throughout most of last year," said Julian Evans-Pritchard, head of China economics at Capital Economics. "But with the tailwind from fiscal policy likely to be more modest this year, the PBOC will have to work harder to prevent credit growth, and therefore wider economic activity, from slowing too quickly."
The January lending data highlight a mix of positive and cautionary signs: a sizable month-on-month increase in new loans, but levels that did not match market expectations and that remained below the previous year’s record. The pattern of rising government-led financing alongside softer bank lending points to an economy still reliant on policy support even as officials weigh measures to rekindle private demand.
Impacted sectors and market implications
- Banking and financials: fluctuations in loan volumes and shifts in loan composition affect bank balance sheets and margins.
- Real estate: the prolonged property downturn continues to weigh on credit demand and household confidence.
- Manufacturing and consumer sectors: weak factory activity and soft household spending influence demand for corporate and retail credit.