Bank loans lose share in China's social financing

Direct financing gained momentum but has yet to offset weaker credit expansion.

The share of bank loans in China’s social financing fell in H1 2026 compared to a year earlier, according to a report by KPMG.

Bank loans for social financing purposes grew by $1.6t (RMB10.8t) in the first six months of the year, less by $297.19b (RM2t) compared to H1 2025, according to an analysis by KPM.

This coincided with direct financing gaining momentum over the same period, increasing by $133.73b (RMB0.9t) to $312.05b (RMB2.1t).

“The rising share of direct financing aligns with financial sector reform by reducing reliance on bank lending,” KPMG wrote in a report published in August 2026.

However, direct financing has yet to offset weaker credit expansion and remains concentrated amongst larger and technology firms, it said.

Chinese banks’ loan growth is expected to remain sluggish throughout 2026, with retail confidence staying weak, according to a separate report by Morningstar.

Banks also face greater volatility in lending yields as they increasingly price loans using interbank rates, according to S&P Global Ratings.

(US$1 = RMB 6.73, as of 20 August 2026)