21st Century Business Herald reporter Feng Zitong
In March 2026, the PPI rose by 0.5% year-on-year, ending negative growth and bringing positive signals to the banking industry.
PPI, or Producer Price Index, is a core indicator for measuring the prosperity of the industrial sector. Its shift from negative to positive indicates a reversal of the continuous downward trend in industrial product prices, suggesting a potential rebound in manufacturing production vitality and a marginal recovery in corporate profit margins.
Corporate credit issuance is an important pillar of commercial banks' business, and the quality of corporate credit issuance is highly correlated with the operational status of industrial enterprises. How will the positive signal of PPI returning to positive affect banks' corporate credit business? Will these impacts further transmit to the stock price performance of bank stocks?
On the 10th, the National Bureau of Statistics released data showing that in March, the PPI rose by 0.5% year-on-year, marking the first positive growth in PPI year-on-year data since October 2022; the month-on-month data increased by 1.0%, also setting the largest single-month increase in 48 months.
From the market's perspective, this signifies that China's industrial economy is emerging from a prolonged period of price stagnation lasting over three years. Huatai Securities' research report believes that the return of PPI to positive territory indicates a significant improvement in the supply-demand balance of China's manufacturing sector, with expectations for income growth among enterprises and residents likely to recover.
On a month-on-month basis, the PPI has risen for six consecutive months. Previously, Fu Linghui, spokesperson for the National Bureau of Statistics, also pointed out that this trend is conducive to improving the operational conditions of enterprises and market expectations, injecting momentum into the sustained healthy development of the industrial economy.
Positive signals for the banking industry have thus emerged.
&#34;There is a significant negative correlation between PPI and the bank's non-performing loan ratio,&#34; said Fu Yifu, a special researcher at SuShang Bank.
The shift of PPI from negative to positive means that industrial product prices are no longer &#34;falling endlessly.&#34; Fu Yifu believes this has direct significance for alleviating the debt repayment pressure on enterprises in cyclical industries such as manufacturing and raw material processing, helping to curb the new generation of non-performing loans. For banks with a high proportion of corporate business and significant exposure to manufacturing, this is undoubtedly a &#34;pressure relief valve.&#34;
The actual impact of this positive effect still needs further observation.
Lu Jinfeng, Senior Vice President of the Financial Business Department at Dongfang Jincheng, told reporters that while the return of PPI to positive is a positive signal, the current risk focus of banks has shifted to the retail sector, with personal loan non-performing rates under pressure and existing risks in the real estate sector not yet cleared, with asset quality in a bottoming phase. A true turning point requires PPI to shift from cost-push to demand-pull and resonate with the stabilization of the real estate sector.
However, at the recent performance meetings of listed banks at the end of March, many executives from commercial banks expressed confidence in the asset quality of banks.
Gu Bin, Vice President of Bank of Communications, stated that in the future, the focus will be on the following areas: first, due to factors such as declining personal repayment capacity and decreasing market demand, it is expected that the asset quality of retail credit and small business credit will still be under pressure this year; second, the current real estate market is still in a bottoming and stabilizing phase, and relevant risks in the real estate sector will continue to be monitored; third, some industries are experiencing homogeneous competition, leading to a narrowing of corporate profit margins and increasing operational differentiation, and attention will continue to be paid to the operational status of enterprises in these industries and subsequent risk changes
According to the annual report data, the total loan amount of the six major banks has exceeded 74.6 trillion yuan, with a year-on-year growth rate of over 10%, becoming the main engine driving the growth of loan scale. More notably, asset quality continues to improve, with several banks achieving new lows in non-performing loan ratios for corporate loans.
In addition to asset quality, can the recovery of PPI further bring about a rebound in credit demand, and can loan pricing stabilize?
Logically, the answer is affirmative.
The rise in PPI indicates an improvement in the profitability of industrial enterprises, enhancing their willingness to expand reproduction, thereby driving demand for corporate credit. Fu Yifu pointed out that the upward trend in PPI drives the nominal GDP growth rate to rebound, making the &#34;nominal anchor&#34; for bank loan pricing clearer, and banks are expected to enhance their bargaining power in both the repricing of existing loans and the pricing of new loans.
However, it is important to clarify that this transmission process has a time lag.
According to Fu Yifu's judgment, the shift of PPI from negative to positive typically requires 2 to 3 quarters to drive the scale of credit, as enterprises, upon seeing price increases, will first use it to repair their balance sheets and replenish cash flow, rather than immediately expanding production investment.
Lu Jinfeng further supplemented this from the behavioral characteristics of enterprises. In his view, as the profitability of industrial enterprises improves, investment demands such as expansion and technological upgrades will gradually rebound, thereby boosting corporate credit demand. However, he also reminded that &#34;the current price recovery has not yet effectively translated into long-term confidence for enterprises, production and operation expectations still have fluctuations, and the growth rate of medium- and long-term loans remains low, enterprises are more reliant on short-term loans to maintain liquidity. The expansion of corporate credit still needs to wait for clearer signs of recovery on the demand side.&#34;
Regarding loan pricing, Lu Jinfeng believes that the interest margin game has entered the &#34;deep water zone.&#34; He analyzed that the current market liquidity is abundant, and to consolidate the recovery trend, policies still tend to guide financing costs downwards. The &#34;asset yield recovery&#34; and &#34;policy price stabilization orientation&#34; are in mutual competition, making the recovery of banks' net interest margins more gradual, difficult to show a V-shaped reversal.
He stated, &#34;Only when PPI continues to rise and effectively transmits to enterprise expectations will the credit cycle substantially start, and the window period for banks to 'compensate quantity with price' will truly open.&#34;
The high dividend logic of bank stocks remains the main line
The marginal improvement in the fundamentals of banks due to PPI turning positive is already clear, so can this change further transmit to bank stocks and positively impact stock prices?
According to Yang Delong, chief economist of Qianhai Kaiyuan Fund, the positive shift of PPI indeed provides a certain favorable push to the fundamentals of bank stocks, and in the short term, it is also beneficial for boosting investor confidence. &#34;But it is just a signal and will not have a significant impact on the underlying logic of the banking sector.&#34; Yang Delong emphasized, the core logic supporting the rise of bank stocks remains &#34;low valuation, high dividend.&#34;
Data also confirms this. As of the end of March 2026, the overall price-to-book ratio of the A-share banking sector is about 0.67 times, which is in the historically deep undervalued range, while some state-owned banks have dividend yields exceeding 5%. This dividend return undoubtedly has a strong appeal to long-term funds such as insurance funds and pensions
At the same time, the performance bottom of the banks is gradually becoming clear. In 2025, listed banks ended two consecutive years of negative revenue growth, and the year-on-year decline in net interest margin has significantly narrowed.
Fu Yifu added from the perspective of valuation recovery that the rebound in PPI has become the core driving force for the recovery of economic expectations. Under moderate inflation expectations, investors are more focused on the improvement elasticity of bank stocks' fundamentals and the expected difference in valuation recovery. &#34;From the fundamental conditions for valuation recovery, the banking sector has met the necessary conditions for valuation reassessment after PPI turns positive, but the recent underperformance of the banking sector compared to the market also reflects the market's cautious attitude towards the sustainability of the recovery.&#34;
Regarding specific investment decisions, Fu Yifu suggested that it is currently appropriate to gradually allocate to high-quality city commercial banks with a high proportion of corporate business and some bottom-tier joint-stock banks whose asset quality has improved first, but the pace of positioning should match the gradual confirmation of the sustainability of the PPI rebound

中证银行

512800

516310

512820

In March 2026, the PPI rose by 0.5% year-on-year, ending negative growth and bringing positive signals to the banking industry. The rebound in PPI indicates a reversal of the continuous downward trend in industrial product prices, with the manufacturing sector's production vitality expected to recover, leading to a marginal improvement in corporate profit margins. Huatai Securities believes that the positive PPI marks an improvement in the supply-demand balance of China's manufacturing industry and a restoration of growth expectations for corporate and household incomes. Although the positive PPI is a positive signal, the focus of banking risks has shifted to the retail sector, with individual loan delinquency rates under pressure, and asset quality still needs to be monitored

PPI turns positive, can bank stocks "ride the tailwind"?