China’s new bank loans climbed to ¥1.08 trillion in September, beating market expectations of ¥975 billion. At first glance, that seems like a welcome improvement especially after the rather dismal lending figures we’ve seen over the past few months. That being said, lending is still down roughly 16% compared to September last year. And adding to that, the year-on-date snapshot isn’t pretty either.

In looking at the first nine months of 2026, Chinese banks have now extended ¥11.52 trillion in new loans during this period. That falls short when viewed in comparison to the ¥14.75 trillion over the same period last year. In short, we’re looking at a rather substantial 22% decline in new lending this year.

I would argue that the figures above tell us quite a bit about the state of China’s domestic economy.

The problem that China is facing right now is not that banks aren’t willing to lend. It is more of a case that households and businesses aren’t particularly eager to borrow in the first place.

A big part of that can be traced back to the property market crash that unfolded in 2021. With the property sector still struggling to this day, households have little incentive to take on new mortgages. Meanwhile, businesses aren’t exactly rushing to expand operations when domestic consumption remains sluggish.

Even the PBOC itself has already acknowledged that slower loan growth could become the new normal, as declining borrowing from the property sector and local government financing vehicles outweighs demand from emerging industries.

As such, I wouldn’t read too much into the improvement from the September figure today. It needs to be put into context as China’s credit recovery remains very much an uphill battle.

Sure, Beijing can make borrowing cheaper and encourage banks to lend. However, to convince households and businesses to actually take on more debt is a whole other matter.

This article was written by Justin Low at investinglive.com.