Chinese banks saw net new yuan loans shrink by CNY 340 billion in July 2026, the largest monthly contraction on record and a sharp divergence from market expectations for a net increase of CNY 45 billion. Borrowers repaid CNY 590 billion in loans to the real economy, the highest level of repayments since 2002. The weakness in new lending remained consistent with a slowing economy and subdued consumer confidence—particularly in the housing sector—which continued to weigh on credit demand.
At the same time, aggregate financing, a broader gauge of overall credit, reached CNY 1.41 trillion, but the net increase was driven largely by government bond issuance rather than private-sector borrowing. As a result, outstanding loan growth slowed to 5.1% year-on-year, down from 5.3% in the previous month.
