New bank loans in China returned to growth during August, but they were much lower than market expectations, in an indication of continued weak demand for credit from households and companies, while the authorities intensified their moves to protect exporters from losses resulting from the rise of the yuan.
Calculations based on data from the People's Bank of China showed that banks provided new loans worth 60 billion yuan (about 8.95 billion dollars) during August, after loans recorded a record contraction of 340 billion yuan in July.
The numbers were much weaker than the expectations of analysts polled by Reuters, amounting to 400 billion yuan, and remained below the level of 590 billion yuan recorded in the same period last year.
The weak borrowing comes at a time when domestic demand is still facing pressure, which limits the appetite of families and companies to obtain new financing, despite the measures taken by Beijing to support economic activity.
In parallel, the Chinese Foreign Exchange Regulatory Authority asked banks to encourage more of their corporate clients to hedge exchange rate risks, according to informed sources, in light of the rise in the yuan and the pressure it causes on exporters.
Informal guidance has been issued in recent months, requiring banks to increase the proportion of clients hedging their foreign exchange exposure using hedging instruments.
The move reflects the authorities' concern about the impact of the rise in the yuan on the export sector, which represents one of the most prominent sources of support for the Chinese economy in light of weak domestic demand.
The Chinese currency has risen by about 4.3 percent since the beginning of the year, trading near its highest levels in four years against the dollar, which reduces the value of companies' foreign revenues when converted into the local currency.
According to the sources, some local branches of the Foreign Exchange Regulatory Authority provided support to companies that increase hedging operations, including covering part or all of the installments of currency options contracts.
Some banks in provinces less active in foreign trade were also asked to raise their hedging ratios to the national average, while banking institutions in export-dependent coastal provinces were encouraged to push the ratio to about 40 percent or more.
Chinese companies have already increased their interest in financial derivatives to confront the risks of currency fluctuations. The total value of foreign exchange derivatives contracts concluded by companies amounted to about $1.4 trillion during the first half of the year, an increase of nearly 40 percent, compared to the same period last year.
The national currency risk hedging ratio rose to 35.3 percent, an increase of 5.3 percentage points from the end of 2025.
This expansion came as the yuan continued to rise, while the war in Iran led to increased volatility in the currency and energy markets. The Chinese export sector is still recording strong activity, benefiting from the demand for high-tech products and goods related to artificial intelligence, at a time when the economy is suffering from weak domestic spending.
Goldman Sachs analyzes estimated the losses of listed Chinese companies resulting from currency movements at about 70 billion yuan during the first half of the year, equivalent to about 4 percent of their total profits, which are the highest losses of their kind in a decade.
However, analysts indicated that these losses remained absorbable thanks to the growth in profits of export-oriented companies.
The latest data puts the Chinese authorities in front of a double scene: a domestic demand for credit that remains weak despite the return of loans to growth, and a strong export sector that, in return, faces increasing pressure from the rise of the yuan, which prompts Beijing to expand the use of hedging tools to protect corporate profits.
