China’sMayBankLendingBeatsForecastsasCorporateCreditRebounds

China’s new bank loans returned to positive growth in May, beating market expectations, as a surge in corporate bill financing offset persistent weakness in household borrowing.

Aggregate financing and new yuan loans both exceeded average forecasts after an unexpected slump in April, according to data released Friday by the People’s Bank of China. New yuan loans totaled about 520 billion yuan ($76.5 billion), while total social financing, a broad measure of credit and liquidity in the economy, expanded by 2 trillion yuan in May.

Despite the headline beat, the underlying data point to a fragile recovery, with consumers continuing to pay down debt and businesses favoring short-term credit over long-term investment.

A Caixin survey showed the market had expected 504 billion yuan in new loans and 1.8 trillion yuan in aggregate financing. May’s credit expansion was driven mainly by corporate borrowing, which rose to about 640 billion yuan, up nearly 120 billion yuan from a year earlier and 250 billion yuan from April. But the increase was heavily reliant on short-term instruments, with bill financing jumping by nearly 560 billion yuan. Short-term corporate loans rose by 100 billion yuan, while medium- and long-term corporate loans fell by 20 billion yuan.

Household credit, meanwhile, continued to contract. Consumers made net loan repayments of 141.1 billion yuan in May, including 84 billion yuan in short-term loans and 57.1 billion yuan in medium- and long-term loans.

Weak demand for medium- and long-term household loans reflects a sluggish property market that has yet to broadly revive borrowing. While property transactions showed slight signs of recovery in May, performance was uneven. Nearly half of tier-one and tier-two cities recorded month-on-month growth in transaction volumes, but the tier-two market overall remained in a downtrend, even as transactions in lower-tier cities surged.

A broader household deleveraging trend is also taking hold. Slower growth in personal loans has pushed the household leverage ratio down from 62.3% in the first quarter of 2024 to 59% in the first quarter of 2026. Industry experts said demand for mortgages and consumer loans remains weak, and household leverage may continue to decline as consumers repair their balance sheets.

In the first five months of 2026, new yuan loans totaled 9.1 trillion yuan, down 157 million yuan from a year earlier. Total social financing reached 17.5 trillion yuan, down 1.2 trillion yuan year-on-year, mainly dragged lower by weak loan issuance. Yuan loans to the real economy fell by 1.4 trillion yuan from the same period last year.

Government bond issuance dominated aggregate financing in May, accounting for more than half the total at 1.2 trillion yuan. Corporate bonds contributed 170 billion yuan, ranking third behind yuan loans and government bonds, though their contribution to total social financing fell by about 280 billion yuan from the previous month.

The decline in corporate bond issuance was expected, though overall performance beat forecasts. Experts said companies are increasingly using a wider range of financing channels, including sci-tech bonds, industry bonds, equity financing and internal profits, which have partly replaced traditional bank loans.

On the monetary front, the broad money supply measure M2 grew 8.6% year-on-year at the end of May, unchanged from April and in line with market expectations. The narrow money supply measure M1 rose 5.5%, up 0.5 percentage point from April, narrowing the gap between the two indicators to 3.1 percentage points from 3.6 percentage points a month earlier.

Contact editor Han Wei (weihan@caixin.com)