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

Standard Chartered’s Carol Liao and Moriarty Lam analyze slowing loan growth in China despite stable real Gross Domestic Product (GDP) and recent reflation. They note broad-based weakness across housing-related lending and other sectors, as new services and high-tech growth engines are more credit-light and rely more on direct financing. This transition is seen as critical for China’s debt sustainability and financial-market development.

Loan growth slowdown and structural shift

"China’s loan growth has continued to decelerate, despite relatively stable real GDP growth and recent reflation."

"The slowdown is broad-based: housing-related lending has contracted, and loan growth in the rest of the economy has also slowed since 2023, including in relatively resilient sectors such as light industries and services."

"China’s emerging growth engines, such as services and high-tech industries, are less loan-intensive than traditional growth drivers such as housing and infrastructure."

"This shift matters for China’s debt sustainability and financial-market development."

"Furthermore, with savings remaining abundant while loan demand softens, interest rates are likely to remain low for longer."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)