Policy dividends + market-driven approach: Banks bet on medium- and long-term manufacturing loans

Ask AI · How Can Banks Optimize Their Corporate Business Structure Amid Narrowing Net Interest Margins?

By Qin Yufang, China Economic Net reporter, Guangzhou

Recently, many banks—including state-owned large banks, joint-stock banks, and city commercial banks—have undertaken multiple upgrades to their corporate credit loan products, such as increasing credit limits, streamlining processes, offering interest rate discounts, and relaxing access thresholds across various aspects.

Overall, since the beginning of 2026, commercial banks have been actively deploying and continuously intensifying efforts in the corporate credit lending sector, with their scale experiencing rapid growth. Data show that in February, new medium- and long-term corporate loans increased by RMB 890 billion, reaching a new high with a year-on-year increase that outpaced recent months and marking the largest single-month year-on-year growth in nearly three years.

Industry insiders analyze that the robust growth in corporate credit is mainly driven by multiple overlapping factors, including the effective implementation of policy-based financial instruments, proactive fiscal measures, and the concentrated commencement of projects after the Spring Festival. Meanwhile, the recovery of household credit remains slow: household loans have rarely decreased, and the “strong corporate, weak retail” squeeze-out pattern has further intensified.

Looking at the full year, the sustainability of banks’ corporate credit growth will depend on the implementation progress of the next round of RMB 800 billion in policy-based financial instruments and the coordination rhythm of local special-purpose bonds. Under the ongoing pressure of narrowing net interest margins, competition for high-quality corporate clients is intensifying. Banks are shifting from solely pursuing scale expansion to deeply exploring customers’ overall value, responding to pricing challenges through “structural adjustment and efficiency improvement,” leading to a quiet reshaping of the corporate business logic.

In February, corporate loans hit a three-year high with significant increase

The latest data disclosed by the People’s Bank of China show that at the end of February, the RMB loan balance was RMB 27.752 trillion, up 6% year on year. In the first two months, RMB loans increased by RMB 5.61 trillion. Among these, household loans decreased by RMB 194.2 billion, while loans to enterprises (and institutions) increased by RMB 594 billion. The “strong corporates, weak retail” squeeze-out pattern has further widened.

Zeng Gang, Chief Expert and Director of the Shanghai Finance and Development Laboratory, pointed out that in February, new medium- and long-term corporate loans added RMB 890 billion, an increase of RMB 350 billion year on year, setting a new high for single-month year-on-year growth in nearly three years.

Meanwhile, some listed banks also emphasized their corporate business deployment during institutional research visits. In response to questions from research institutions, Nanjing Bank (601009.SH) stated: “In 2026, corporate credit started steadily, with the pace of issuance meeting expectations and performing better than last year, laying a solid foundation for the full-year growth. The next strategic focus will be closely aligned with the core priorities of Jiangsu Province’s ‘14th Five-Year Plan’ and the upcoming ‘15th Five-Year Plan,’ focusing on key tasks, deepening the local market, and strengthening characteristic businesses.”

Since the start of 2026, why have commercial banks increasingly focused on corporate credit issuance? China Merchants Securities (600999.SH) believes that, on one hand, early fiscal expenditure by the government in 2026 and the multiple policy measures announced by the People’s Bank of China in mid-January have significantly boosted banks’ enthusiasm for extending credit to enterprises. Additionally, after the Spring Festival, the demand for project initiation and construction has generally driven an increase in corporate medium- and long-term loans. On the other hand, the later timing of the 2026 Spring Festival, falling in mid-February, means that before the holiday, enterprises still had needs for bonuses, subsidies, and other benefits. Coupled with banks’ “short-term volume chasing” behavior, this further boosted short-term loan growth.

“The ‘two heavy’ construction project lists issued at the end of 2025 also stimulated investments in projects that began gradually in early 2026. At the same time, corporate investment confidence and willingness are improving. China’s development in areas such as artificial intelligence, digital economy, and new energy remains positive, and efforts to advance digitalization and green transformation in traditional industries continue, boosting corporate investment confidence,” said Du Juan, senior researcher at the Sushang Bank Research Institute.

Ding Ximiao, Chief Economist of United Securities and Deputy Director of the Shanghai Finance and Development Laboratory, further pointed out that after the Spring Festival in 2026, as projects began operation one after another, a large volume of supporting medium- and long-term loans entered a concentrated disbursement period—this is the most direct driving factor.

Ding Ximiao also emphasized that at the beginning of the year, banks often have a strong desire to accelerate credit disbursement for high-quality projects to lock in annual earnings. Additionally, in February, bill financing decreased by RMB 204.3 billion compared to the same period last year, indicating that banks, by compressing lower-yield bill financing, “freed up” capacity to meet genuine, high-yield medium- and long-term loan demands.

Zeng Gang also noted that in early 2025, regional debt reduction efforts were concentrated, with some banks’ loans replacing existing debt financing, lowering the base for enterprise medium- and long-term loans in the same period, thus naturally providing some “help” to year-on-year comparisons in 2026. Meanwhile, the credit issuance rhythm in January 2026 was more balanced than in previous years, with no signs of volume surges, leaving room for continued growth in February. The pacing over the two months was well aligned, resulting in a relatively stable start.

In contrast, retail credit growth remains weak, and the “strong corporates, weak retail” pattern continues to strengthen. Galaxy Securities’ research report pointed out that in February, household loan growth slowed, with the year-on-year growth rate dropping by 1.8 percentage points from the previous quarter to 0.5%. Among these, personal housing loans declined by 1.8%, while operating loans and consumer loans grew by 4% and 0.7% year on year, respectively. Residents’ effective consumption demand still needs recovery.

Zeng Gang stated that the fundamental structural reason for the “strong corporates, weak retail” squeeze-out pattern has not disappeared. In February, new household loans were negative by RMB 650.7 billion, the lowest in history. Mortgage medium- and long-term loans decreased by RMB 66.5 billion more than the previous year, and short-term consumption loans decreased by nearly RMB 200 billion year on year. The impact of new lending rules remains ongoing: residents’ risk appetite remains low, and income expectations recover slowly, creating endogenous constraints on retail credit that are difficult to reverse in the short term through policy measures.

“For banks, ‘strong corporates and weak retail’ is also a result of proactive adaptation. On the corporate side, policy-backed projects provide a stable anchor for scale expansion; on the retail side, banks are shifting toward ‘reducing volume and improving quality,’ actively lowering high-risk, low-quality consumer loans, and reallocating resources toward personal business loans and wealth management,” Zeng Gang emphasized.

Narrowing net interest margins are forcing a rethinking of corporate business logic

Regarding the pace of corporate credit issuance, Zeng Gang expects that in the first quarter, supporting loans are likely to maintain a strong momentum. Whether this can continue into the second quarter depends on the implementation progress of the next round of RMB 800 billion instruments and the coordination rhythm of local special bonds—if both can be accelerated simultaneously, credit momentum can be sustained across quarters.

The 2026 Government Work Report explicitly states that RMB 755 billion of central budgetary investment will be arranged, and RMB 800 billion in ultra-long-term special government bonds will be used for the “two heavy” projects; additionally, RMB 800 billion in new policy-based financial instruments will be issued to attract more social capital into investment.

Zeng Gang said that compared with the RMB 500 billion scale in 2025, the scale of new policy-based financial instruments in 2026 will increase by 60%. At the same time, in the next round of project reserves, greater emphasis will be placed on verifying the timing of capital arrival and whether the overall supporting fund arrangements are feasible. Policy guidance will focus more on areas such as digital economy, artificial intelligence infrastructure, and new urbanization, with project selection tracks shifting accordingly.

Galaxy Securities’ latest report pointed out that recent reductions in structural monetary policy tools, the expansion of interest rate cuts, the implementation of interest subsidies for small and medium-sized enterprises, and the expansion of equipment renewal loan interest subsidies are expected to continue directing bank credit resources toward key sectors, supporting a “strong start” for credit in 2026 and full-year growth.

Zeng Gang specifically mentioned that some instrument funds have already been allocated specifically to projects involving private enterprises, and banks’ interest in such projects has increased, though risk-control thresholds are also higher.

Zeng Gang said that overall, the “two heavy” supporting financing has entered an acceleration phase. The National Development and Reform Commission has completed the full list of 1,459 projects. Large banks, leveraging their low financing costs and policy advantages, are firmly securing core project resources; regional banks are seeking differentiated entry points in local projects. The pace of both types of institutions is accelerating toward convergence.

Another aspect of credit scale expansion is the unavoidable pressure on net interest margins. Data from the National Financial Regulatory Administration’s website show that as of the end of Q4 2025, the net interest margin of commercial banks had fallen to 1.42%.

In Zeng Gang’s view, although the decline in net interest margins has somewhat eased, it remains far from the widely accepted “comfortable range.” Some institutions believe that loan rates are near the bottom of the cycle, but this does not mean that the pricing pressure on corporate credit has been fundamentally alleviated—structural competition persists, only its form is changing.

“The competition for high-quality corporate clients is the most immediate source of current pressure,” Zeng Gang said. For leading state-owned enterprises, central SOEs, and large infrastructure projects, loan pricing has been pushed to extremely low levels, with some operating loan rates entering the “1” range. Banks frequently cut rates to retain high-quality clients, but the hard constraint of net interest margin limits the scope for active price reductions. More importantly, excessively low pricing may trigger funds arbitrage risks, and banks face internal constraints in maintaining their pricing floors.

Against this backdrop, the behavioral logic of banks’ corporate business is quietly shifting. Zeng Gang noted that the narrowing of net interest margins is compelling banks to stop judging performance solely by loan volume and to place greater emphasis on customers’ overall value—by coordinating intermediary services such as corporate settlement, cash management, bond underwriting, and wealth management sales, to offset margin losses with comprehensive returns. “This transformation is already evident in the strategic planning of joint-stock banks, with the importance of financial market businesses systematically increasing.”

Zeng Gang further analyzed that in the context of “asset scarcity,” market consensus is gradually shifting from “expanding the balance sheet” to “adjusting the balance sheet,” meaning abandoning low-price volume chasing in favor of structural optimization and improving return on assets. Policy-supported fields such as technology finance, green finance, and inclusive finance have become main avenues for banks to achieve scale expansion while maintaining certain pricing levels.