China sees worst credit growth in a year as demand dries

China’s credit expansion was the weakest in more than a year last month, dragged down by slower government bond sales and sluggish borrowing demand across the economy.

Aggregate financing, a broad measure of credit, increased 815bn yuan ($115bn) in October, according to Bloomberg calculations based on data released by the People’s Bank of China on Thursday. That’s the lowest level since July 2024 and well short of the 1.2tn-yuan forecast by economists in a Bloomberg survey.

Financial institutions recorded an expansion of 219bn yuan of new loans in the month, also worse than expected, with growth in the outstanding stock of loans to the real economy reaching a record low.

Government bond issuance has recently slowed compared with a year ago, as authorities brought forward sales earlier in 2025. Another factor at play for credit growth is seasonal, since banks are usually not in a rush to meet their lending targets at the beginning of each quarter.

“Disappointing as the October credit report is, we don’t expect it to push the People’s Bank of China to loosen its key policy levers any further this year. But the PBoC remains in an easing cycle and will probably keep liquidity conditions supportive for growth. Given the weakness in the economy, we see it delivering fresh easing in the first quarter of next year,” says David Qu, Bloomberg Economics.

The disappointing reading came despite the boost from the rollout of funding provided under China’s new policy financing tool, which is worth 500bn yuan. It underlined just how sluggish borrowing demand has become in the face of weak consumer and business confidence.

Companies were reluctant to borrow for investment or expansion, as mid- and long-term corporate loans only expanded 31bn yuan, less than a fifth the level a year ago.

Household mid-and long-term loans, a proxy for mortgages, contracted again, in a sign consumers continue to shy away from home purchases.

Taken together, additional borrowing by households so far this year was the smallest since the global financial crisis in 2008.

“Weak mortgage demand remains a major drag on credit growth,” said Leah Fahy, China economist at Capital Economics. “It’s also clear that the subsidies for consumer loans launched at the start of September haven’t put a floor under household demand.”

Banks struggling to find borrowers are increasingly doling out fake loans to clients in order to meet government-set targets for credit, Bloomberg News has reported.

For now, China’s central bank has signalled it remains patient with the continued slowdown in credit growth, saying it’s natural as the economy transitions away from old growth drivers. That guidance has led to reduced expectations for further interest rate cuts by the end of this year.

Looking ahead, analysts at Barclays Bank see faster sovereign debt sales offering more support toward the end of the year and into 2026. “Government bond issuance could gain pace in the coming months,” they said.