During the 2025 May Day holiday, many tourists in China chose not to spend. Vendors across various regions lamented, “There are lots of people, but they’re not buying.” The image shows street scenes in Shanghai during the holiday (video screenshot).
[People News] The strategy of relying on the "Golden Week" to stimulate domestic demand is increasingly losing its effectiveness. This year's "May Day" holiday showcases a stark contrast: tourist attractions are teeming with visitors, and transportation hubs are overwhelmed with congestion; however, this bustling scene is largely disconnected from any real boost in domestic demand, as consumer data reveals a concerning trend.
The holiday is crowded with people but lacking in wealth; the Golden Week has effectively turned into a rusted week. This is not merely a seasonal fluctuation but a clear signal of economic recession stemming from fundamental issues. Beneath the facade of prosperity, the rapid decline of real estate wealth, the vicious cycle of fiscal debt, and the structural impact of AI on the job market are converging to create a large net that silently suffocates the economy.
Continuing consumption downgrade, extreme budget travel for May Day
During the May Day period in 2026, data from the Ministry of Transport indicates that inter-regional movement of people is close to 1.5 billion, with domestic tourism expected to reach approximately 314 million, reflecting an increase from the previous year. The Communist Party's big data has shifted from mere statistical significance to a tool for political aesthetics and public sentiment.
Examining the actual social consumption power, it is evident that the trend of consumption downgrade is intensifying. On social media platforms like Xiaohongshu and Douyin, young people are no longer sharing experiences from high-end hotels or Michelin-starred restaurants; instead, they are posting about "six people crammed into a homestay," "strategies for sharing sofa beds," and "budget routes using green skin trains and shared bicycles." Carpooling and splitting costs among multiple travellers have become commonplace, with even extreme cases reported where "backpackers spend less than 50 yuan per night on homestays."
The YouTube channel "Beijing Daguzi" blogger has highlighted four notable changes that emerged during this year's short holiday. Firstly, the blogger raised doubts about the authenticity of the official data for this year's May Day holiday, expressing surprise at the observation that people around him seemed to be staying at home. The community's parking spaces were full, with no cars available for travel, creating a stark contrast to the official statistics. The second change is that this year, people are increasingly opting for budget travel. The blogger presented data to support this claim. In 2019, the number of domestic tourists reached 195 million, with an average daily spending of 150 yuan. However, by 2025, the number of domestic tourists is projected to rise to 270 million, while the average daily expenditure is expected to drop to 108 yuan. This year, more travellers are seen sleeping on the ground in tents, self-driving and even sleeping in their cars. During outdoor excursions, they set up small stoves for barbecues, stating that while hotels may be expensive, they can simply sleep in their cars. At tourist attractions, visitors are primarily taking photos without making purchases. The third change observed by the blogger is that the middle class around him is largely refraining from going out during the short holiday, instead waiting to travel abroad later in the year for better value. Domestic travel is perceived as spending money to endure discomfort, making it more appealing to stay home, enjoy tea, and read books. Lastly, the fourth change is the decreasing number of domestic wedding banquets. Previously, May Day was a favoured auspicious date for many young couples to hold their wedding ceremonies, even surpassing the National Day holiday due to the pleasant weather. This year, high-end hotels have significantly reduced their wedding banquets, and there are even fewer birthday and full-month celebrations.
The blogger is stating a harsh reality; the current consumer chill is particularly pronounced in the physical retail sector. Even in key commercial areas like Chengdu Taikoo Li, Shenzhen MixC, and Beijing Sanlitun, many mid-to-high-end restaurants and clothing stores have seen a significant drop in customers during the long holiday. Some businesses have reported that daily foot traffic has decreased by 20%-30% compared to the same period in 2024, with revenues barely covering utility and labour costs. The film industry is facing similar challenges, with several films being temporarily withdrawn from release due to disappointing pre-sale ticket sales. Data from relevant platforms indicates that the total box office for the May Day holiday has drastically underperformed expectations, with some cinemas experiencing an unusual 'over 50% vacancy rate in screening rooms.'
This phenomenon is not due to a complete unwillingness to spend among the public, but rather a result of 'shrinking wallets' and pessimistic expectations. The motivation for residents to save has increased, particularly among younger people, where the shift from 'lying flat consumption' to 'moonlight tribe turning into savings tribe' is quite noticeable. On social media, discussions around 'May Day no spending challenge' and 'poor travel diaries' have gained traction, reflecting a significant shift in consumer attitudes.
The evaporation of excess wealth and the substantial decline in real estate value
The structural cause of the consumption contraction is the systematic reduction of residents' balance sheets. Real estate constitutes about 70% of household wealth in China and serves as the primary means for the middle class to accumulate wealth. Estimates suggest that by the end of 2025, approximately $18 trillion (around 130 trillion RMB) of real estate wealth in China will have been lost, with some pessimistic projections nearing 160 trillion RMB. With a population of 1.4 billion, this translates to an average loss per person ranging from over 100,000 to 170,000 RMB.
The ongoing decline in housing prices is the primary driving force behind current economic challenges. In several third- and fourth-tier cities, housing prices have plummeted by 40%-50% from their peak levels. Even in major first-tier cities like Beijing and Shanghai, the listing prices for second-hand homes have experienced a notable correction. The sales area and revenue from new homes have faced negative growth for several consecutive years, with projections indicating that new home sales in 2025 will be more than halved compared to the peak in 2021. Industry leader Vanke (Wanke) reported a staggering loss of 5.95 billion yuan in the first quarter of 2026, alongside a significant drop in contract sales. In an effort to recover funds, the company is even considering selling off non-core assets, including parts of its pig farming operations.
This loss of wealth has triggered a pronounced 'reverse wealth effect.' Homeowners are witnessing a reduction in their asset values, which in turn diminishes their spending power; meanwhile, non-homeowners are becoming increasingly cautious due to unstable income expectations and heightened employment pressures. Among university graduates and middle-aged white-collar workers, there has been a rise in cases of unemployment or reduced income. The real estate sector once accounted for nearly 30% of GDP, and its downturn is directly impacting employment and investment in related industries.
Moreover, the real estate crisis is closely linked to the financial health of local governments. Land transfer fees, which were once a crucial source of revenue for local finances, have seen a dramatic collapse, exacerbating the imbalance between income and expenditure. From 2022 to 2025, land transfer revenues have significantly declined, dropping by more than 50% compared to the peak in 2021.
Fiscal debt is now deeply ensnared in the Laffer curve dilemma.
While micro-level consumption is experiencing a downgrade, the macro fiscal landscape is entering a perilous zone of the Laffer curve. According to Laffer curve theory, when the tax rate surpasses a certain critical threshold, the tax base contracts due to a decline in economic activity, ultimately resulting in reduced fiscal revenue. Currently, China's broad macro tax burden rate is at a high level, with some estimates suggesting that the actual burden is nearing or exceeding the theoretical sensitive range of 35%-40%. Businesses, particularly small and medium-sized enterprises, are grappling with dual pressures from explicit taxes and implicit costs such as social security, environmental protection, and administrative expenses, which are severely squeezing profit margins. Consequently, many companies are opting to cut production or exit the market.
The slowdown in land finance has further deteriorated the local fiscal situation. In 2025, land transfer revenues are projected to decline by 14.7%, marking four consecutive years of double-digit decreases. To address the shortfall, local governments have become trapped in a cycle of 'borrowing new to repay old.' In the first quarter of 2026, the scale of government bond issuance is substantial, with daily borrowing reaching hundreds of billions. The deficit rate is anticipated to exceed 4%, and the balance of local government debt continues to rise.
This pattern of diminishing marginal returns is quite apparent. High levels of debt lead to increased interest expenses, which further crowd out funds available for public welfare and investment. The banking system is under strain, and the ultimate risk may be transferred to ordinary depositors. Economists caution that without structural reforms to lower tax burdens and optimise expenditure structures, the debt spiral will continue to limit future growth potential. Some studies suggest that the peak tax rate on China's Laffer curve is around 40%, and current policies must be vigilant against the risk of revenue decline after surpassing this peak.
AI is intensifying the unemployment crisis.
If the debt and real estate crisis represents an "old ailment," then the impact of AI on the job market is a "new injury" that is currently unfolding. Research reports from institutions like Citibank suggest that AI could directly replace or affect tens of millions to over a hundred million jobs in China. Approximately 30% of jobs are at high risk of AI exposure, with around 70 million jobs, or 9.6%, facing significant replacement risks.
In the summer of 2026, 12.7 million new graduates will enter the job market, adding to the existing workforce and creating a challenging employment landscape. The unemployment rate for those aged 25-29 has reached a historic high of 7.7%, while the youth unemployment rate (excluding students) for those aged 16-24 has at times approached or exceeded 16%-18%. AI has shown efficiency advantages in areas such as programming, data analysis, accounting, legal documentation, customer service, and research, leading to the rapid optimisation of many entry-level positions.
The number of individuals engaged in "flexible employment" across the country is significant, estimated to be between 240 million and 280 million. This group often lacks comprehensive social security, overtime pay, and stable income, while facing high work intensity. AI has accelerated the replacement of mid- to low-skill jobs, and competition for high-end talent has intensified, resulting in a polarised employment landscape.
The quietness of the May Day holiday is just a small reflection of the economic decline under the Chinese Communist Party. Consumption downgrade is the visible symptom, asset shrinkage is the underlying cause, the debt spiral represents a macroeconomic deadlock, and the impact of AI acts as a policy accelerator. The Chinese economy in 2026 is teetering on the edge of an extremely dangerous cliff.
(First published by People News) △
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