China new yuan loans shrink $1.47b in April as credit demand stalls

Loans remained concentrated on policy-supported sectors, according to Fitch Ratings.

Weak domestic demand is reflecting in Chinese banks’ loan performance, as lending activity remains concentrated in policy-supported sectors.

New yuan-denominated loans contracted $1.47b (RMB10b) in April 2026 despite ample system liquidity, according to Fitch Ratings. This underscores the persistence of subdued credit demand and banks’ cautious appetite, the company said.

“Lending activity remains concentrated in policy-supported sectors—infrastructure, green energy and advanced manufacturing—whilst property-related lending, unsecured consumer credit and SME borrowing remain structurally weak,” Fitch said.

Weak household confidence, the ongoing property correction and a soft labour market are limiting any sustained recovery in consumption, the company said.

Retail sales rose only 0.2% year-on-year (YoY) in April, falling from the 1.7% growth registered in March. Domestic auto sales also fell by 21.6 YoY.

China’s lending already missed expectations in March, with corporate lending and household loans slowing during the month, according to an earlier report by Bank of America (BofA) Global Research.

In retail property, some improved performance remains concentrated in selected prime and luxury assets, whilst broader property conditions remain lacklustre, Fitch said.

This suggests mass-market sentiment remains muted and housing conditions beyond tier-one cities remain very weak, it added.

Meanwhile, a draft bank restructuring law could hasten consolidations amongst rural lenders.

The draft financial law, which China released for public consultation on 23 March, will expand the authority of the National Financial Regulatory Administration, letting regulators restructure troubled banks through forced mergers, asset transfers, and bridge institutions.

(US$1 = RMB 6.79)