Net new yuan loans extended by Chinese banks contracted by CNY 340 billion in July of 2026, the sharpest contraction on record, and contrasting sharply from market expectations that they would increase by a net CNY 45 billion. Borrowers repaid 590 billion yuan of loans to the real economy, the most since 2002. The softening trend in new loans remained in trend as a slowing economy and poor consumer sentiment, particularly for housing, limited demand for credit. Meanwhile, aggregate financing, a broader measure of credit, was at CNY 1.41 trillion, although the net increase was mostly due to the issue of government bonds instead of the private sector. With that, outstanding loan growth grew 5.1% annually, slowing from the 5.3% rate from the previous month.