Direct capital market financing in China gathered momentum during the first half of 2026, though it has not yet fully compensated for slowing bank credit expansion. According to a KPMG report released in August 2026, the proportion of bank loans within China’s total social financing declined compared to the same period in 2025. Bank lending for social financing reached RMB 10.8 trillion ($1.6 trillion) in H1 2026, representing a RMB 2 trillion ($297.19 billion) decrease year-on-year. Over the same timeframe, direct financing expanded by RMB 0.9 trillion ($133.73 billion) to total RMB 2.1 trillion ($312.05 billion), reflecting structural financial reforms designed to curb reliance on traditional bank credit.

Despite this shift, KPMG noted that direct financing remains largely concentrated among technology companies and large corporations, leaving it unable to fully cushion the broader deceleration in credit growth. Industry analyses point to continued headwinds for Chinese lenders throughout 2026. A report by Morningstar highlights that bank loan growth is likely to remain sluggish due to soft retail confidence, while S&P Global Ratings projects heightened volatility in loan yields as commercial banks increasingly benchmark their lending rates against interbank market rates.

Click here for more on Banking