Goldman Sachs: China's credit was notably weaker than expected in April, cuts 2026 TSF growth forecast

Overview

In this report, Goldman Sachs analyzes China's April credit and money data. The report notes that April credit data were clearly below market expectations, mainly due to weaker-than-expected bank loan disbursement and a decline in shadow banking credit. Outstanding RMB loans fell on an unadjusted basis, and TSF outstanding growth eased slightly YoY, reflecting insufficient credit expansion momentum.

Core views

The report's core view is: first, April TSF flow was materially below consensus, with weaker bank loans being one of the main reasons; second, the increase in bond issuance provided some substitution for bank loans, but the weaker-than-expected TSF flow still indicates underlying credit demand remains soft; third, RMB loan structure quality is weak, with corporate loan growth driven mainly by short-term bill financing, while medium- and long-term corporate loans declined; fourth, the rise in fiscal deposits suggests a slower pace of fiscal spending, which may weigh on M1 growth; fifth, based on credit growth coming in weaker than expected, Goldman Sachs lowered its forecast for full-year 2026 TSF growth.

Analysis framework

The report uses a macro credit data tracking framework, comparing new RMB loans, outstanding RMB loans, TSF flow, TSF stock, M1, M2, as well as bond financing and shadow banking credit sub-items, and combines market consensus, Goldman Sachs' prior forecast, YoY growth rates, and seasonally adjusted annualized rates to assess the strength of credit demand.

Methodology notes

• Macro credit analysisTSF component analysis

  Use TSF flow and outstanding growth to observe the financing environment for the real economy, breaking out contributions from bank loans, government bonds, corporate bonds, bills, trust loans, and entrusted loans.

  The report argues that although bond issuance rose in April, weaker bank loans and shadow banking credit caused total TSF to miss expectations, indicating that credit demand has not truly improved.

• Loan structure analysisRMB loan tenor and usage structure

  Distinguish between household loans, corporate medium- and long-term loans, and bill financing to assess the quality and sustainability of loan growth.

  April corporate loan growth was driven entirely by a surge in bill financing, while medium- and long-term corporate loans declined, indicating weak loan quality.

• Monetary conditions analysisM1 and M2 growth tracking

  Evaluate corporate demand deposits, broad liquidity, and the pace of fiscal spending through changes in M1 and M2 YoY growth.

  M1 growth edged down to 5.0% YoY in April, while M2 growth edged up to 8.6% YoY; the increase in fiscal deposits may imply a slower pace of fiscal spending and weigh on M1.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• China macro assets

  Weaker-than-expected credit growth usually affects views on economic growth, policy easing, and risk appetite.

  Strengths

  If policy support intensifies or fiscal spending accelerates, macro liquidity and financing demand may improve.

  Weaknesses

  Current data show soft credit demand, with both corporate medium- and long-term financing and household loans weak.

  Comparison

  Compared with March, April TSF outstanding growth fell from 7.9% to 7.8%, and RMB loan outstanding growth fell from 5.7% to 5.6%.

  Risks

  If credit continues to undershoot expectations, growth expectations and risk asset pricing could come under pressure.

• China bond financing

  The increase in corporate and government bond issuance substituted for bank loans and was an important change in April's financing structure.

  Strengths

  Lower financing costs supported higher bond issuance, partially offsetting the decline in loan disbursement.

  Weaknesses

  The improvement in bond financing did not prevent TSF flow from coming in significantly below expectations.

  Comparison

  Seasonally adjusted corporate and government bond issuance rose from RMB 1.429tn in March to RMB 1.741tn in April.

  Risks

  If bond financing only substitutes for loans without creating incremental financing demand, real-economy credit expansion may still remain weak.

• Bank loans and bill financing

  Changes in loan structure reflect bank credit supply and real-economy demand conditions.

  Strengths

  A sharp short-term increase in bill financing supported the apparent expansion in corporate loans.

  Weaknesses

  The decline in medium- and long-term corporate loans and household loans shows insufficient true credit demand.

  Comparison

  April corporate loan expansion was mainly driven by RMB 1.243tn of bill financing, while medium- and long-term corporate loans declined by RMB 410bn.

  Risks

  If banks rely on bill financing to fill quotas, loan growth quality and sustainability may be poor.

Key data

• New RMB loansRMB -10bn in April 2026Bloomberg consensus was RMB 300bn, and Goldman Sachs' forecast was RMB 300bn; RMB loans to the real economy were RMB -400bn.
• Outstanding RMB loan growth5.6% YoY in April 2026March was 5.7% YoY; Goldman Sachs estimates April seasonally adjusted annualized growth at 4.5%.
• TSF flowRMB 620bn in April 2026Below Bloomberg consensus of RMB 1.25tn and Goldman Sachs' forecast of RMB 1.3tn.
• TSF outstanding growth7.8% YoY in April 2026March was 7.9% YoY; implied seasonally adjusted annualized growth was 7.9% in April versus 6.1% in March.
• 2026 full-year TSF growth forecast8.0% YoYGoldman Sachs lowered the forecast from 8.5% YoY previously.
• M2 growth8.6% YoY in April 2026Bloomberg consensus and Goldman Sachs' forecast were both 8.5% YoY; March was 8.5% YoY.
• M1 growth5.0% YoY in April 2026March was 5.1% YoY; the increase in fiscal deposits may weigh on M1.
• Change in household loan outstandingDown RMB 787bn in April 2026Down RMB 522bn in the same period last year, indicating weak household loan demand.
• Corporate loan structureBill financing increased by RMB 1.243tn, while medium- and long-term corporate loans declined by RMB 410bnThe report stresses that bill financing is a short-term bank-loan form and typically rises when banks try to fill unused loan quotas.
• Fiscal depositsUp RMB 739bn in April 2026RMB 368bn more than the same period last year, suggesting a slower pace of fiscal spending.

Impact & implications

The investment implication of this report is that both the headline data and the structural quality of China's credit expansion show soft demand. The rise in bond financing can explain part of the slowdown in bank loans, but it cannot fully offset the funding shortfall reflected in the overall TSF miss. If credit demand remains soft, market attention may shift further toward policy support for growth stabilization, the pace of fiscal spending, and monetary easing; at the same time, weak medium- and long-term corporate loans may also affect views on the strength of real-economy investment and the recovery in domestic demand.

Risks

• Credit demand remains weak, causing TSF and RMB loan growth to fall further below expectations.
• Bond financing substitution for bank loans is not enough to support overall real-economy financing demand.
• Continued declines in medium- and long-term corporate loans may indicate insufficient corporate investment appetite.
• A slow pace of fiscal spending may continue to weigh on M1 and real-economy liquidity.
• High growth in bill financing may obscure weak true loan demand.

What to watch

• Whether new RMB loans in upcoming months recover to around market expectations.
• Whether TSF outstanding YoY growth stabilizes around 8% or continues to decline.
• Whether medium- and long-term corporate loans can turn positive and improve loan structure quality.
• Whether government and corporate bond issuance can continue to offset weak loan growth.
• Whether changes in fiscal deposits and fiscal spending pace improve M1 growth.
• Changes in the M1-M2 spread and what they signal about corporate activity and liquidity.