China: Credit-light growth reshapes loan demand – Standard Chartered

Standard Chartered's experts Carol Liao and Moriarty Lam examine the slowing loan growth in China, despite stable real GDP and recent reflation. They highlight a broad-based decline across various sectors, particularly housing-related lending, and note that new services and high-tech growth engines are more reliant on direct financing.

This transition is considered crucial for China's debt sustainability and financial-market development. The deceleration in loan growth is evident across the economy, with housing-related lending contracting and other sectors experiencing a slowdown in loan growth since 2023. Notably, even resilient sectors like light industries and services have witnessed a decrease in loan demand.

This shift in credit demand is significant for China's financial landscape, as emerging growth engines such as services and high-tech industries are less reliant on loans compared to traditional drivers like housing and infrastructure. With abundant savings and softening loan demand, interest rates are expected to stay low for an extended period.