China's New Bank Loans Shrink in October, Missing Forecasts

China’s new yuan loans shrank by 100 billion yuan in October, the third monthly contraction this year, as households and companies paid down debt and credit demand stayed weak, Reuters reported on Friday, citing central bank data.

Analysts polled by Reuters had expected new loans of about 20 billion yuan for the month, compared with 220 billion yuan in October last year. Lending also declined in April and July, according to the report. Market data site FX.co likewise recorded the October figure at minus 100 billion yuan and described the drop as unexpected.

Households and firms repay debt

Household loans, which include mortgages, fell by 430 billion yuan in October after being flat in September, while corporate loans contracted by 160 billion yuan, against an increase of 1.29 trillion yuan the month before, according to Reuters calculations. The People’s Bank of China does not publish a monthly breakdown, so the figures were derived from cumulative data.

New yuan loans in the first 10 months of the year totalled 11.42 trillion yuan, down from 14.97 trillion yuan a year earlier. Outstanding yuan loans grew 4.7% from a year earlier, a record low, compared with 4.8% in September and analyst forecasts of 4.8%.

Money supply and financing

Broad M2 money supply rose 7.1% year on year, its slowest pace in 19 months, down from 7.2% in September and below the 7.2% forecast in the Reuters poll. Narrow M1 money supply grew 4.4%, up from 3.2% in September. The outstanding stock of total social financing, a broad measure of credit, rose 7.2%, compared with 7.1% a month earlier.

Zhaopeng Xing, senior China strategist at ANZ, said credit growth stayed weak in October, with borrowers turning to net repayments. Zhou Hao, chief economist at Guotai Junan International, said aggregate financing still relies mainly on bond issuance.

The report noted that targeted credit support was introduced in late September and that an 800-billion-yuan policy financing tool was fully deployed in late October. The central bank reiterated its “moderately loose” monetary policy stance this week.

What’s next

Xing said the central bank’s priority remains exchange-rate stability, which makes fresh policy measures unlikely in the near term. He added that China’s full-year growth is now set to exceed 4.5%.

Beijing has set a 2026 growth target of 4.5% to 5.0%, which Reuters said appears within reach after faster third-quarter growth.

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