China’s May lending misses forecasts as property slump saps demand

China May Loans Miss Forecasts Amid Property Slump

China’s new bank lending rose to 520 billion yuan ($77 billion) in May, recovering from a rare contraction the previous month but falling short of analyst expectations, according to data released Thursday by the People’s Bank of China.reuters

The figure, calculated by Reuters based on PBOC data, marks a rebound from April’s 10 billion yuan contraction — the first monthly decline since July 2025 — but underscores persistent weakness in credit demand as a prolonged property downturn weighs on borrowing appetite.reuters

Weak Demand Persists

The shortfall comes despite the PBOC’s efforts to boost lending. In late May, Reuters reported that the central bank had instructed major state-owned banks to increase lending after demand from households and businesses continued to falter. The one-year loan prime rate has been held at a record low of 3.0% for 12 consecutive months, while the five-year mortgage reference rate sits at 3.5%.reuters

Analysts had varied expectations for the May reading. CICC projected new loans at approximately 450 billion yuan, while Lundgreen’s Investor Insights forecast just 200 billion yuan. The actual figure exceeded some of the more conservative estimates but still lagged last year’s level for the same period.biggo

Property Crisis Drags On

China’s real estate downturn, now in its fifth year, remains the primary drag on credit demand. New home prices across 70 cities declined 3.5% year-on-year in April, the 34th consecutive month of contraction and the sharpest pace since May 2025. Fitch Ratings warned earlier this year that the steep investment decline is intensifying credit risks for homebuilders, banks, and construction companies.cnbc

An estimated 80 million unsold or vacant homes continue to weigh on the market, according to the Atlantic Council. Total new loans in the first four months of 2026 stood at 8.59 trillion yuan, down from 10.06 trillion yuan in the same period last year.atlanticcouncil

Outlook

The data adds to mounting evidence that Beijing’s stimulus measures have yet to generate a sustained recovery in domestic demand. Outstanding yuan loan growth hit a record low of 5.6% in April, and the PBOC faces growing pressure to find new ways to channel credit into an economy still grappling with cautious consumers and a battered housing sector.investing