Chinese banks' yuan loan books shrank in October, the third monthly contraction this year. New yuan loans fell by about 100 billion yuan, according to Reuters calculations from People's Bank of China data released on Friday, as households and companies repaid more debt than they took on.

The result matters for investors in Chinese bank shares and for anyone counting on credit to carry the recovery. Loan growth is a main driver of bank earnings in China. A shrinking loan book leaves less room to grow profits, and it suggests that the targeted credit support introduced in late September has yet to revive private demand for credit.

Analysts polled by Reuters had expected new loans of 20 billion yuan for the month. In October 2025, banks extended 220 billion yuan of new yuan loans.

Household and corporate loans both contract

The People's Bank of China does not publish monthly breakdowns, so the October figures are derived by subtracting its January-September totals from its January-October totals. On that basis, household loans, which include mortgages, fell by 430 billion yuan in October after a flat September, Reuters calculated. Corporate loans contracted by 160 billion yuan, compared with growth of 1.29 trillion yuan in September, when banks typically push lending before the quarter ends.

October is usually a soft month. The weeklong National Day holiday cuts working days, and lenders often front-load credit in September. This year's drop, though, came on top of earlier contractions in April and July.

The central bank's release shows how far households have pulled back. In the first 10 months of the year, household loans fell by 1.46 trillion yuan, including a 1.41 trillion yuan drop in short-term borrowing and a 50.1 billion yuan fall in medium- and long-term loans. Loans to companies and institutions rose 12.39 trillion yuan over the same period, led by 6.69 trillion yuan of medium- and long-term credit.

Total new yuan loans for January through October came to 11.42 trillion yuan, down from 14.97 trillion yuan a year earlier. Outstanding yuan loans stood at 283.33 trillion yuan at the end of October, up 4.7% from a year earlier. Reuters described that as a record-low growth rate, down from 4.8% in September and below the 4.8% analysts had forecast.

Zhaopeng Xing, senior China strategist at ANZ, told Reuters that medium- and long-term loans to both households and companies had turned to net repayment. He added that the central bank's priority remains exchange-rate stability, which makes fresh policy measures unlikely in the near term.

Government bonds carry total social financing

Broader credit held up better because the state is doing more of the borrowing. Total social financing, which counts bank loans along with bonds, shadow credit and equity raised by companies, stood at 469.16 trillion yuan at the end of October, up 7.2% from a year earlier, according to the central bank. That compares with 7.1% growth in September, Reuters reported.

Outstanding government bonds rose 14.4% to 106.41 trillion yuan and made up 22.7% of the total, 1.4 percentage points more than a year earlier. Yuan loans to the real economy accounted for 59.5%, down 1.5 percentage points. Corporate bond net financing reached 3.1 trillion yuan in the first 10 months, 1.27 trillion yuan more than a year earlier.

Zhou Hao, chief economist at Guotai Junan International, told Reuters that aggregate financing still relies mainly on bond issuance, which he described as a normal structural shift toward direct financing.

The flow numbers point the same way. New social financing for January through October totaled 28.61 trillion yuan, 2.29 trillion yuan less than in the same period last year, the PBOC said. Yuan loans to the real economy within that total rose 10.91 trillion yuan, 3.61 trillion yuan less than a year earlier.

Money supply slows as deposits pile up

Broad M2 money supply grew 7.1% to 359.06 trillion yuan, the slowest pace in 19 months and below the 7.2% expected in the Reuters poll. Narrow M1 money, which tracks cash and demand deposits and is often read as a gauge of business activity, rose 4.4% after 3.2% in September. Cash in circulation grew 10.7%.

Savers kept adding to bank balances. Yuan deposits rose 21.97 trillion yuan in the first 10 months, including 8.47 trillion yuan from households, and outstanding yuan deposits grew 7.7% to 350.65 trillion yuan. Funding is plentiful for the banks. Borrowers who want it are scarcer. The weighted average interbank lending rate fell to 1.3% in October, 0.1 percentage point lower than in September, the central bank said.

Beijing has tried to steer more credit into investment. China said in late October it had fully deployed an 800 billion yuan policy financing tool, which analysts say could support long-term corporate loans, Reuters reported. The economy grew faster than expected in the third quarter, and the 2026 growth target of 4.5% to 5% appears within reach, helped by exports, according to Reuters.

The central bank said this week it would keep monetary policy moderately loose and adjust its tools in a timely manner, Reuters reported. Its November credit figures, due next month, will show whether October's repayments were a holiday blip or a trend.