[BEIJING] China’s central bank pledged to strengthen financial support to key areas including tech and consumption, as it moves further away from its previous playbook of funnelling loans to traditional industries such as real estate and infrastructure.
The country’s credit structure has undergone profound changes over the past decade, with the key driver for new loan growth shifting away from asset-heavy industries to the so-called five key priority sectors, the People’s Bank of China said in its quarterly monetary policy report published on Friday (Aug 15).
The five key priority financing sectors – including high-technology, small- and medium-sized enterprise, and elderly care – accounted for about 70 per cent of new loan growth during the first half of 2025. By contrast, real estate and infrastructure accounted for more than 60 per cent of the growth in 2016, according to the report.
Going forward, the financial system will continue to uphold its fundamental mission of serving the real economy, and the central bank will centre its support on technological innovation and consumption expansion, the PBOC said.
“Efforts will be made to continuously optimise the credit structure, better align credit supply with economic restructuring and dynamic balance, and further meet the effective financing needs of the real economy,” the PBOC said in the report.
The report came as the country’s economy slowed across the board in July. Factory activity, investment and retail sales disappointed, suggesting spillovers from Donald Trump’s tariffs are casting a pall over the world’s No 2 economy.
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China’s first contraction in outstanding loans since 2005 has deepened worries about a downturn in the economy. Analysts generally expect the PBOC to roll out monetary easing in the fourth quarter, following cuts to interest rates and banks’ reserve requirement ratio in May.
Meanwhile, Chinese authorities have in recent weeks shifted their attention to addressing the challenge of deflation and price wars.
When it comes to China’s fight against deflation, the PBOC is in a bind.
Officials have limited room for conventional monetary easing such as rate cuts. The central bank is also looking to maintain a stable exchange rate and protect narrowing profit margins among lenders, which constrains its ability to loosen policy.
In May, the PBOC called for coordinated measures to boost inflation, arguing that increasing money supply under an investment and production-led economic model could instead worsen the supply-demand imbalance. BLOOMBERG
