China optimizes credit structure, boosting support for key sectors

Since the beginning of this year, China has continued to optimize its credit structure, further increasing support for sectors such as technology, green development, inclusive finance, elderly care, and the digital economy.

A report recently released by the People's Bank of China, the central bank, shows that as of the end of June, loans to technology, green development, inclusive finance, elderly care, and the digital economy had grown year-on-year by 12.5 percent, 25.5 percent, 11.5 percent, 43 percent, and 11.5 percent, respectively — all faster than the pace of total loan growth.

Over the past decade, the structure of credit allocation has undergone profound changes, with the main driving factors shifting from heavy asset industries to high-quality development areas, according to the report.

Currently, new loans to the five major areas mentioned above account for about 70 percent of total new lending. This stands in stark contrast to 2016, when real estate and infrastructure loans made up more than 60 percent of the increase in new lending, the central bank report said.

Supporting technological innovation has become a key direction for improving financial services. As of the end of June, the outstanding balance of technology loans in China reached 44.1 trillion yuan ($6.16 trillion), up 12.5 percent year-on-year, 5.8 percentage points faster than total loan growth during the same period. Among them, loans to technology-focused small and medium-sized enterprises have maintained a growth rate of over 20 percent so far this year.

Green finance has provided strong support for sustainable economic development. The balance of green loans rose from 9.9 trillion yuan at the end of 2019 to 36.6 trillion yuan at the end of 2024, with an average annual growth rate of over 20 percent.

Inclusive finance refers to providing appropriate and effective financial services at affordable costs to all segments and groups of society that have financial service needs, based on the principles of equal opportunity and commercial sustainability. Vigorously developing inclusive finance helps promote the sustainable and balanced development of the financial sector, while enhancing social equity and harmony.

By the end of the second quarter, the balance of inclusive loans for small and micro enterprises stood at 36 trillion yuan, up 12.3 percent year-on-year. The balance of inclusive agriculture-related loans reached 13.9 trillion yuan, an increase of 1.1 trillion yuan from the beginning of the year, according to the National Financial Regulatory Administration.

Zeng Gang, chief expert and director of the Shanghai Institution for Finance & Development, noted that financial resources have been significantly tilted toward key areas of the real economy, precisely meeting the financing needs of SMEs as well as agriculture, rural areas, and farmers. This demonstrates both the inclusiveness and the targeted nature of financial services.

“Looking ahead, banks must further optimize the credit structure while maintaining stable operations. They should continue to strengthen support for the real economy, while also enhancing resilience through refined risk management, thereby promoting a virtuous cycle between finance and the economy,” Zeng said.

Official data show that by the end of the second quarter, the balance of nonperforming loans in China's commercial banks stood at 3.4 trillion yuan, a decrease of 2.4 billion yuan quarter-on-quarter. The NPL ratio was 1.49 percent, down 0.02 percentage points.

“The double decline in NPLs both in balance and ratio at the end of the second quarter was mainly due to commercial banks accelerating the disposal of nonperforming assets, as well as the faster pace of loan issuance, which produced a dilution effect,”

Dong Ximiao, chief researcher at Merchants Union Consumer Finance, said.

However, he cautioned that pressure on asset quality remains significant, particularly regarding inclusive SME loans, real estate lending, and non-credit asset risks, which have not yet been fully resolved. Accelerating the disposal of existing risks and strengthening the prevention of new risks remain major challenges, he said.