Chinese banks pivot to state and green loans as consumer lending slows

Government exposure made up 16% of banks’ total assets as of April 2026.

Banks in China are increasingly relying on state loans and green loans amidst slowing consumer and household loan growth.

Banks are playing a greater role in supporting selective fiscal and industrial policies in the market, with the share of exposure to government in banks' total assets surging to 16% in April 2026 from just 11% in 2019, according to data from Natixis Asia Research.

In contrast, household and corporate loan growth have slowed, pointing to cautious consumer and business sentiment, it said.

“Although there have been multiple rollouts of policies supporting consumption, households have opted to save rather than add leverage to spend or invest,” according to the Natixis China Banking Monitor 2026, published on 8 June.

The contraction in property loans also reflects the still weak home sales and investment by developers, Natixis Asia Research said.

As credit growth continues downbeat in China, banks increasingly rely on green labels, it noted. Green loans now contribute over 50% of all new loans since 2024. Green bonds have also accelerated, the report said.

With weaker profitability and higher provisioning, it will be an ongoing challenge for banks to generate organic capital growth, it warned.

Changes to risk weights, local government debt swaps, and capital injections have helped capital adequacy of banks. Without these, the situation would have been worse.

“The above suggests banks are walking a tightrope in supporting various policy goals, but the challenges can be increasingly huge if there is no government support,” Natixis Asia Research said.

The government is expected to do the minimum to keep banks profitable, but the profit growth will be slower due to emerging challenges such as absorbing the cost of deteriorated credit risks, it added.

“It means banks will continue to sacrifice their own profitability for supporting the greater goals in policy priorities,” the report said.