China’s new yuan loans totalled 4,710 billion in January. This was below expectations of 5,000 billion.
The data indicates lending activity fell short of forecasts for the month. No further figures were provided in the report.
Credit Demand Remains Soft
The lower-than-expected new loan figure for January suggests that credit demand is not picking up as strongly as hoped for at the beginning of the year. This points to continued caution from both businesses and consumers. We see this as a continuation of the soft economic momentum that characterized the second half of 2025.
We should anticipate increased downward pressure on Chinese equities. Traders could consider buying put options on broad market ETFs like the FXI or shorting futures on the FTSE China A50 index. This bearish sentiment is reinforced by last year’s sluggish corporate profit growth, which saw the Hang Seng Index underperform global peers by over 15% in 2025.
This weakness in China’s economy will likely impact global commodities. We expect prices for industrial metals like copper, which recently traded around $8,300 per tonne, to face headwinds. Short-dated futures contracts or options on major mining stocks exposed to China could be an effective way to position for this.
The data is also likely to put pressure on the Chinese yuan. We could see the USD/CNH currency pair, which hovered near 7.28 through late 2025, attempt to break higher. Buying call options on the USD/CNH offers a defined-risk way to trade this potential depreciation of the yuan.
This poor credit number raises the probability of imminent policy action from the People’s Bank of China. We should watch closely for a cut in the Reserve Requirement Ratio (RRR) to inject more liquidity into the system. Such an announcement could create significant short-term volatility, making straddles a viable strategy for those anticipating a sharp move without being certain of the direction.
Lunar New Year Data Distortions
However, we must remember that credit data around the Lunar New Year can be inconsistent. Looking back at 2024 and 2025, there were similar distortions that made the trend clearer only in March. Therefore, initial positions should be sized to account for a potential rebound if subsequent data proves more robust.
