Banks shift to noninterest income as heavy lending dwindles

As China's growth model shifts toward technology, advanced manufacturing and other emerging industries, its banks are being pushed to rethink what it means to finance the economy and where to make money.

The transition is changing the nature of financial demand. Manufacturers increasingly need financing for technological upgrades, mergers and acquisitions advisory services and cross-border transactions, while technology companies require banks to assess business models and technology prospects rather than simply provide collateral. Households, meanwhile, are looking beyond deposits to wealth management, retirement planning and risk protection.

That shift is reflected in the outline of China's 15th Five-Year Plan (2026-30), which places the development of technology finance, green finance, inclusive finance, pension finance and digital finance among its priorities. For banks, it is also accelerating a move beyond capital-intensive lending toward fee-based and other noninterest businesses, allowing capital to be deployed more efficiently while supporting the sectors Beijing sees as key to future growth.

Pan Gongsheng, governor of the People's Bank of China, said the country's industrial structure is shifting from traditional, factor-intensive sectors toward technology-intensive industries, as sectors such as technological innovation, advanced manufacturing and green, low-carbon industries expand rapidly.

The shift is also changing the nature of corporate financing demand. New growth industries tend to require less bank credit because their assets are increasingly concentrated in technology, data, brands and human capital rather than land, factories and equipment. In the first half of 2026, new growth drivers, led by advanced manufacturing, contributed more than 40 percent of economic growth.

Such asset-light businesses generally operate with lower leverage and require less bank lending to generate each unit of economic output, Pan said in an article published in the Qiushi Journal on Sept 16.

This suggests that the shift toward a more asset-light model is not simply a choice for banks, but an inevitable path for the financial sector as it aligns itself with national development strategies.

Cong Lin, vice-minister of the National Financial Regulatory Administration, said at a news conference on Sept 10 that over the next five years, the administration will encourage financial institutions to accelerate their reform and transformation, shifting their focus from pursuing speed and scale to prioritizing quality and efficiency, while continuously enhancing their core competitiveness and strengthening their endogenous momentum and vitality for development.

Against a backdrop of slowing growth in traditional lending income, listed banks are accelerating the transformation and upgrading of their business models, with noninterest income becoming a key lever for optimizing their revenue mix.

In the first half of this year, China's largest State-owned commercial banks generated a combined 564.08 billion yuan ($84.6 billion) in noninterest income, up 10.3 percent year-on-year. All six recorded positive growth, with three posting double-digit increases.

At a news conference announcing the bank's 2026 interim results, Zhang Yi, president of China Construction Bank, said the bank adopted a forward-looking, proactive and flexible approach to asset-liability allocation in the first half, optimizing its overall asset portfolio while increasing the proportions of both loans and financial investments.

The bank focused on areas including services for new quality productive forces. The share of lending to the five major financial priorities, manufacturing and other key sectors increased steadily.

During the same period, Industrial and Commercial Bank of China continued to strengthen its integrated financial services capabilities while capitalizing on opportunities in different market cycles. It generated 124.62 billion yuan in noninterest income in the first half.

Yao Mingde, senior executive vice-president of ICBC, said the bank had seized on the recovery in capital markets and rising demand for gold as an asset allocation option. Revenue from agency precious-metals services and fund distribution increased 103 percent and 60 percent year-on-year in the first half, respectively.

To meet companies' financial needs throughout their life cycles, ICBC has focused on integrated corporate financial services, including investment banking advisory, bond underwriting, syndicated lending, asset securitization and guarantees. Yao added the group's revenue from securitization services rose 7 percent year-on-year in the first half.