China’s credit growth disappoints as weak loan demand persists

[BEIJING] China’s credit expansion slowed more than expected in March from the year-ago period, as the continued weakness in household and business demand weighed on financing activities.

Aggregate financing, a broad measure of credit, increased 5.2 trillion yuan (S$971.6 billion) in March, as shown by Bloomberg calculations based on the data released by the People’s Bank of China (PBOC) on Monday (Apr 13).

That compares with a median forecast of about 5.6 trillion yuan by economists in a Bloomberg survey and an expansion of 5.9 trillion yuan recorded in the year-ago period.

Financial institutions issued three trillion yuan of new loans in the month, versus a median forecast of 3.5 trillion yuan.

The pullback came after credit expansion picked up sharply at the start of the year, boosted by strong government bond issuance and a seasonal rush by banks to extend loans.

While China’s consumer confidence improved in recent months, as shown by an official gauge, it remains well below the level before 2022, when Covid-19 lockdowns and a burst property bubble hammered sentiment.

The housing market is still in distress, despite a recent rebound in transactions involving second-hand homes in some megacities.

Goldman Sachs Group economists predict that property prices in bigger cities will stabilise in the next year or two, though smaller urban areas will likely continue to endure a slump due to higher inventories and population outflows.

Less support came from government bond issuance, which slipped to around one trillion yuan from 1.5 trillion yuan in March 2025.

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Even so, a rise in corporate-bond financing may have helped offset part of the drag, Citigroup economists said in a report prior to the data release.

Meanwhile, signs of excess liquidity in the financial system have emerged, with money-market rates falling in recent days.

That could be a possible consequence of ample cash sloshing around the economy but failing to translate into credit growth, which could act as a constraint on any moves to ease monetary policy. 

An increasing number of economists are predicting the PBOC will not cut interest rates or lenders’ required reserves in 2026, as the oil crisis caused by the Iran war pushes up inflation expectations. BLOOMBERG