PBoC: five favored sectors account for 70% of loans now

PBoC: five favored sectors account for 70% of loans now

In a significant shift in its lending strategy, the People's Bank of China (PBoC) has revealed that five favored sectors now account for 70% of the total loans issued. This strategic realignment underscores the central bank's commitment to supporting key industries that drive economic growth and innovation.

According to Reuters, China's new yuan loans contracted by 50 billion yuan ($6.97 billion) in July, marking the first contraction since July 2005 and the largest monthly decline since December 1999 [1]. This unexpected contraction highlights the central bank's efforts to manage economic growth while addressing potential risks.

The PBoC's focus on five sectors—technology, consumer discretionary, small and mid-sized enterprises (SMEs), infrastructure, and healthcare—aligns with its broader economic strategy. These sectors are not only critical for economic development but also offer significant growth potential in the long term.

The technology sector, particularly AI-driven infrastructure, is expected to benefit from lower borrowing costs, enabling companies like NVIDIA and Microsoft to invest in research and development and scale operations [2]. Similarly, the consumer discretionary sector, while facing stagflationary pressures, has the potential to stimulate spending through lower credit card and auto loan rates.

Small and mid-sized enterprises (SMEs), which account for 44% of U.S. economic output, are highly sensitive to interest rates. A rate cut would reduce financing costs, enabling these businesses to expand and hire [2]. Infrastructure development is also a priority, as it drives economic growth and creates jobs.

Healthcare, a sector that has been gaining attention due to its resilience and potential for innovation, is also a favored sector. The PBoC's focus on these sectors indicates a strategic shift towards supporting industries that can drive long-term growth and innovation.

The PBoC's decision to focus on these five sectors is a strategic move to bolster economic growth and address potential risks. By targeting these sectors, the central bank aims to support industries that are critical for economic development and innovation.

References:
[1] https://www.reuters.com/markets/asia/china-july-bank-loans-unexpectedly-contract-first-time-20-years-2025-08-13/
[2] https://www.ainvest.com/news/anticipating-fed-rate-cut-strategic-sectors-outperform-rate-environment-2508/