China's October Bank Lending Shrinks as Bonds Keep Financing Growing

Borrowing weakens while government financing expands

China's yuan bank lending contracted by 100 billion yuan in October 2026, while outstanding financing across the wider economy grew 7.2% from a year earlier to 469.16 trillion yuan. The contrast shows how government and corporate bonds are supporting funding even as households and businesses remain cautious about taking on bank debt.

The People's Bank of China's October financial statistics report, released on November 13, put outstanding yuan loans at 283.33 trillion yuan, up 4.7% from a year earlier. That was the slowest growth rate in the available data, down from 4.8% in September.

October's lending contraction was 320 billion yuan worse than the 220 billion yuan increase a year earlier. It was also the third monthly decline of 2026, following April and July. Economists in two surveys had expected lending to increase, although their forecasts varied considerably.

Broad money supply, known as M2, grew 7.1%, slightly slower than September's 7.2%. Meanwhile, the narrower M1 measure accelerated to 4.4%, from 3.2%. Together, the figures describe an economy where money and financing continue to expand, but bank borrowing is losing momentum.

Why a weak October matters beyond the holiday

October is usually a quiet month for Chinese lending. Banks often increase lending near the end of September, which closes the third quarter, and the national holiday in early October reduces the number of working days.

This year's decline was deeper than that seasonal pattern alone would suggest. New yuan lending totaled 11.42 trillion yuan in January through October, compared with 14.97 trillion yuan during the same period of 2025. The reduction of 3.55 trillion yuan amounts to about 23.7%.

A survey of 11 domestic and international institutions had a mean forecast of 89.7 billion yuan in new October loans and a median of 100 billion yuan. Another economist survey expected a smaller increase of 20 billion yuan. Instead, repayments exceeded new lending by 100 billion yuan.

The central bank publishes cumulative lending figures rather than a complete monthly breakdown. October's lending changes are calculated by subtracting the January through September totals from those for January through October.

That monthly weakness sits alongside a longer adjustment in the property market and restrained domestic demand. Lower borrowing costs can make a loan easier to afford, but households still need confidence in their income, and companies need reasons to expand production or investment.

Households repay debt and build deposits

Household loans fell by 430 billion yuan in October, after being broadly unchanged in September. Corporate loans declined by 160 billion yuan, compared with an increase of 1.29 trillion yuan the previous month.

The household trend extends well beyond a single month. During the first ten months of 2026, outstanding household loans fell by 1.46 trillion yuan. Short term loans accounted for 1.41 trillion yuan of that decline, while loans with medium and long maturities fell by 50.1 billion yuan.

At the same time, household deposits increased by 8.47 trillion yuan. Families were therefore adding to their bank balances while reducing their borrowing across the period. Continuing property market adjustment, subdued willingness to borrow for consumption and weak conditions for individual businesses help explain that caution.

New personal housing loans carried an average interest rate of about 3.1% in October, broadly unchanged from a year earlier. The rate on newly issued enterprise loans was about 2.9%, down roughly 0.2 percentage points. Businesses received somewhat cheaper new credit, while mortgage pricing showed little annual change.

For banks and policymakers, the practical challenge is turning available funding into borrowing that households and companies want to undertake. The deposit and loan figures show that access to money and willingness to spend it are moving differently.

Bonds carry more of the financing load

Aggregate social financing measures funding reaching the economy through several channels, including bank loans, government bonds, corporate bonds and share issuance. It is broader than bank lending, which explains why the two measures can move in different directions.

October brought about 1.15 trillion yuan in new aggregate financing. Government bond financing contributed 1.19 trillion yuan, while corporate bond financing contributed 346.8 billion yuan. Government bonds alone exceeded the net total because contractions in other categories offset part of the money raised.

Zhou Hao, chief economist at Guotai Junan International, described the growing role of bonds in financing:

Aggregate financing still relies mainly on bond issuance, reflecting a normal structural shift in financing as the share of direct financing gradually increases,

During January through October, bond and equity financing together accounted for 52.99% of new aggregate financing, exceeding the share from loans by 13.87 percentage points. Direct financing means raising money from investors through instruments such as bonds or shares, rather than relying entirely on a bank loan.

Corporate bonds supplied 3.1 trillion yuan in net financing during those ten months, 1.27 trillion yuan more than a year earlier. Government bonds supplied 11.49 trillion yuan, although that cumulative amount was 459.2 billion yuan below the previous year's level. Strong government financing in October therefore occurred within a slower cumulative year.

The financing stock reveals a lasting shift

Government bonds outstanding reached 106.41 trillion yuan at the end of October, up 14.4% from a year earlier. They accounted for 22.7% of outstanding aggregate financing, an increase of 1.4 percentage points.

Corporate bonds outstanding reached 36.92 trillion yuan, up 9.6%, with their share rising to 7.9%. Yuan loans to the real economy remained the largest component at 279.31 trillion yuan, but their share slipped by 1.5 percentage points to 59.5%.

These figures separate two useful ideas. New financing is the amount added during a period, like water flowing into a reservoir. Outstanding financing is the accumulated amount still in place, like the water already stored there.

China's financing reservoir was still growing, and its annual growth accelerated from 7.1% in September to 7.2% in October. Yet the amount added during the first ten months was 28.61 trillion yuan, down 2.29 trillion yuan, or about 7.4%, from the same period of 2025.

Some smaller channels also moved in different directions. Entrusted loans, where a bank arranges lending using funds supplied by another party, increased by 208.4 billion yuan over the first ten months. Trust loans declined by 179.8 billion yuan. Domestic equity financing by nonfinancial companies totaled 570.5 billion yuan, up 184.2 billion yuan from a year earlier.

Credit grows faster in services and smaller businesses

Loans to enterprises and public institutions increased by 12.39 trillion yuan during the first ten months, including 6.69 trillion yuan in loans with medium and long maturities. Within the slower total, several areas continued to grow faster than the national lending rate.

Outstanding medium and long term loans to services excluding real estate reached 62.99 trillion yuan, up 9.2% from a year earlier. That growth rate was almost twice the 4.7% increase in all yuan loans. The category includes activities such as wholesale and retail trade, tourism, logistics and information technology.

Inclusive loans to small and micro businesses reached 38.24 trillion yuan, up 6.9%. Such lending programs aim to reach smaller businesses that may struggle to obtain conventional bank credit.

By the end of September, 307,300 small and medium technology enterprises had received loan support. Their loan access rate reached 51.1%. Postal Savings Bank of China researcher Lou Feipeng said the rate had risen by 4.1 percentage points over three years.

Lou explained that sectors receiving faster credit growth still account for a relatively small share of existing lending. Their expansion has therefore been insufficient to replace the borrowing momentum lost in more traditional areas. This helps explain why stronger support for technology firms and service businesses can coexist with weak total loan growth.

Policy funds take time to reach projects

China had fully deployed its 800 billion yuan policy financing tool by October 28. The funding is intended to support investment projects and can help create demand for related bank loans as projects move into construction and spending.

Nankai University finance professor Tian Lihui said two packages of targeted monetary measures had been introduced during the year. They included a reduction of 0.25 percentage points in relending rates, a dedicated relending facility for private enterprises, and a reduction of the same size in the pledged supplementary lending rate.

Relending provides central bank funding that banks can use to support designated borrowers or activities. The pledged supplementary lending program supplies funding through policy banks for selected projects. Support was also extended to the infrastructure categories described as the "six networks."

September's measures and October's funding deployment form a short sequence:

• Late September: policymakers introduced a package of targeted credit support measures.
• By September 30: cumulative issuance of technology innovation bonds exceeded 3.3 trillion yuan.
• October 28: the year's 800 billion yuan policy financing tool had been fully deployed.
• November 13: the central bank released the October financial statistics.

Project funding can appear in bank deposits before contractors, equipment suppliers and other businesses receive payments. The timing of those transfers helps explain why policy deployment and stronger corporate borrowing may emerge in different months.

Local debt restructuring also changes the financing mix. Nearly 2 trillion yuan in special refinancing bonds had been issued during the year, mainly to replace local government hidden debt. Preliminary market estimates put the associated replacement of bank loans at about 1.4 trillion yuan. That process shifts some financing from bank balance sheets into bonds.

Money growth and market rates tell another part of the story

M2 reached 359.06 trillion yuan at the end of October. Its 7.1% annual growth was the slowest in 19 months. M1 reached 116.9 trillion yuan, with growth accelerating to 4.4%, narrowing the gap between the two growth rates to 2.7 percentage points.

M2 captures a broad pool of money, including cash and deposits. M1 focuses on money more readily available for transactions. Its faster growth suggests that transaction balances were expanding more quickly than before, even while lending remained subdued.

Tax payments, movements between ordinary and fiscal deposits, and changes involving investment products and equity markets can affect these measures. During the first ten months, yuan deposits increased by 21.97 trillion yuan, including 3.03 trillion yuan in fiscal deposits and 1.91 trillion yuan in deposits held by nonfinancial companies.

Cash in circulation, or M0, reached 15 trillion yuan, up 10.7% from a year earlier. Net cash issuance during the first ten months totaled 902.3 billion yuan.

Conditions in the market where banks borrow from one another also eased. October's weighted average interbank lending rate was 1.30%, down 0.10 percentage points from September. The rate on pledged bond repurchase agreements, which involve borrowing against bonds, fell 0.07 percentage points to 1.33%.

What the figures mean for the economy

China's central bank reiterated during the release week that it would maintain moderately loose monetary policy and adjust its tools in a timely manner. No date was given for another policy move.

The immediate picture is one of government financing supporting demand while private borrowing remains cautious. Firms in services, technology and smaller business categories are receiving more credit, but household repayments and slower lending in traditional sectors continue to weigh on the total.

Cross border activity provides another measure of yuan use. October settlements in yuan reached 1.9 trillion yuan for current account transactions, including 1.43 trillion yuan for goods trade. Direct investment settlements totaled 560 billion yuan, divided between 210 billion yuan in outward investment and 350 billion yuan in inward investment.

The next stage of financing growth depends partly on how quickly funded projects spend their money and whether households and companies become more willing to borrow. October's figures already show a concrete change: bonds are taking a larger role, while bank lending is becoming more concentrated in selected parts of the economy.

Key Points

• October yuan bank lending contracted by 100 billion yuan, the third monthly decline of 2026.
• Outstanding aggregate financing grew 7.2% to 469.16 trillion yuan, supported by government and corporate bonds.
• New yuan lending in January through October fell about 23.7% from a year earlier to 11.42 trillion yuan.
• Household loans fell by 1.46 trillion yuan over the first ten months, while household deposits rose by 8.47 trillion yuan.
• Bond and equity financing accounted for 52.99% of new aggregate financing during that period.
• China fully deployed its 800 billion yuan policy financing tool by October 28.
• Lending to services excluding property and to small businesses grew faster than total yuan lending.