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China’s credit expansion slowed far more than expected from a year earlier in April while banks extended less new loans, underscoring unusually anemic borrowing demand even for a typically slow month for lending. Aggregate financing, a broad measure of credit, increased less than 630bn yuan ($93bn) in April, according to Bloomberg calculations based on data released by the People’s Bank of China on Thursday, compared with an expansion of 1.2tn yuan a year ago. That was about half of the median forecast of almost 1.3tn yuan by economists in a Bloomberg survey. New loans contracted 15.3bn yuan in the month, versus a median forecast of an increase of 300bn yuan. Chinese households net repaid 786.9bn yuan, the most since comparable data going back to 2010. Loan extension usually weakens in April, part of a seasonal pattern after banks rush to meet their credit targets at the end of the first quarter. Still, the rare lending decline points to soft credit demand, sparking concern that a recent pickup in investment in the world’s second-largest economy might be short-lived. “The contraction means the end of fixed-asset investment rebound,” said Zhaopeng Xing, senior China strategist at ANZ Bank China Co. “With no investment expansion, domestic demand will remain subdued,” he said, forecasting the slowdown in credit growth this year to keep the bond market bullish. As the job market deteriorated in early 2026, households remained cautious about borrowing money despite some recent improvement in the property market. Medium and long-term loans taken by Chinese households, a proxy for mortgages, dropped about 341bn yuan in April, and short-term borrowing by the sector also fell 446bn yuan. “The credit data suggests the new housing loan demand was more than offset by repayment,” said Ding Shuang, chief economist for Greater China and North Asia for Standard Chartered Plc. The signs of stabilisation in top tier cities only reflect “a small portion of the national market,” he added. “Also it seems it is not feasible to boost consumer demand by encouraging households to take more loans,” he said. Government financing made up the bulk of credit expansion in April. Net bond financing by the government increased 904bn yuan. Low yields and a stock market rally drove more companies to switch from borrowing from banks to direct financing. Corporate bond and equity financing rose decently last month, while bank loans and shadow banking tools such as undiscounted bankers acceptances contracted. China’s central bank on Monday warned on the risks of imported inflation from higher oil prices stemming from the war in Iran, offering no hint of preparing to ease policy as it looks to ensure its low policy rates trickle through the economy while reasonable profit margins at banks are maintained. That said, the PBoC will likely keep liquidity ample and allow short-term money market rates running slightly below policy rate given the weak domestic demand, Ding said. 

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.