A blogger remarked: In China, 20% of the population controls 80% of the wealth, while the remaining 80% only hold 20%. How can these 80% afford to consume? (Video screenshot)
[People News] Despite the Chinese Communist Party (CCP) consistently emphasising the need to boost domestic demand and expand consumption, many businesses and residents in first- and second-tier cities like Shanghai and Chengdu have recently shared in interviews with foreign media that consumer behaviour is more cautious than last year, with a decline in foot traffic and a reduction in average spending per customer. They noted, "It's not that there is no business at all, but the average spending per customer has decreased; everyone is trying to save money." Some scholars argue that the public does not lack a desire to consume, but rather lacks the confidence to do so, indicating that the CCP's long-promoted strategy of internal circulation has failed.
Recently, some merchants from Shanghai and Chengdu, when interviewed by The Epoch Times, highlighted several clear trends in consumer behaviour:
1. Downgraded consumption: Residents are opting for cheaper products.
Many merchants have reported to the media that residents are now more inclined to compare prices, wait for discounts, and delay large purchases. Even as outdoor consumption begins to recover, some merchants have observed that customers are more likely to choose low-priced packages, group purchases, or discounted items instead of making impulsive purchases.
Ms Chen, a resident of Huangpu District in Shanghai, shared with a reporter from The Dajiyuan that many locals are choosing to buy cheaper products. "Previously, we would go to supermarkets for groceries, but now we shop at small roadside stores. The clothing shops near my home have all closed and turned into vegetable stalls. The vegetables are quite cheap, and business is thriving there." However, she noted that large supermarkets are no longer bustling with customers: "I seldom visit big supermarkets these days. Just yesterday, I stopped by the Century Lianhua supermarket near my home, and it was quite empty. The checkout lines that used to be long now only have a few people. Supermarket prices are high, and ordinary citizens can't afford them."
2. The Growing Trend of Saving to Mitigate Risks
Employment pressures, weak income expectations, and declining real estate values have eroded the sense of security for many working-class families. While some families still have an income, they are more inclined to "save money to mitigate risks" rather than increase their spending.
Several business leaders expressed to The Epoch Times that, with poor job prospects, unstable incomes, depreciating property values, and significant social security burdens, many residents prefer to save their money. Business owners are also reluctant to engage in long-term planning and can only "take it one step at a time."
A recent analysis by Reuters on consumer behaviour in China indicates that while Beijing publicly emphasises the need to stimulate consumption, the actual measures taken are still quite limited. The real factors suppressing consumption include unstable employment, a sluggish real estate market, and the rising costs of healthcare, education, and retirement, along with the public's weak expectations for future income. Economists suggest that unless improvements are made in social security, safety nets, and income expectations, the public will naturally lean towards "saving more and spending less," leading to a deflationary cycle.
3. Business Sentiment is More Pessimistic than Official Statistics
Many owners of restaurants, retail shops, and small physical stores have shared videos online expressing that 'this year is harder than last year.' The challenges they face include fierce competition, price wars, platform commissions, and consumers reducing their spending on non-essential items. In some cities, shopping malls still attract foot traffic, but the actual sales are low. In essence, it is not that 'everyone is not spending money,' but rather that consumer behaviour is shifting from a willingness to spend to a more cautious approach.
According to The Dajiyuan, Mr. Liu, a businessman from Wenzhou who is involved in clothing wholesale in Shanghai, noted that after the Chinese New Year, customers have become more careful about their purchases: 'Jeans used to sell very well, and most young people liked them, but in the last three to four months, sales have dropped by about 30% compared to the same time last year, and long pants are nearly unsellable. Today's young people are increasingly reluctant to spend money. Many clothing factories are downsizing, and some are shifting orders to smaller manufacturers.'
Mr He, a resident of Chengdu, informed reporters that the number of local stores is also on the decline: 'Chunxi Road is the busiest commercial street in Chengdu. It may seem like there are many shoppers, but once you enter the stores, you'll notice that while there are many people looking around, very few are actually making purchases. In other areas, clothing stores have even fewer visitors. The current economic situation is truly chaotic.'
Mr He remarked that when Li Keqiang was Prime Minister, he introduced the concept of the street vendor economy, which was later rejected by the central government. Now, even the street vendor economy is struggling to take off. He expressed his frustration: 'Platforms like Taobao and JD.com, backed by supportive policies, are putting ordinary people's businesses at risk. I saw a video where a store owner was angrily criticising Taobao for monopolising the market, making it impossible for physical stores to survive.'
Experts: The internal circulation has reached a dead end.
Recently, mainland media reported data from the People's Bank of China, indicating that by the end of the first quarter of 2026, the number of credit cards and loan cards in China is expected to drop to 687 million, a decrease of 9 million cards from the end of 2025. Since peaking at 807 million cards in the third quarter of 2022, the issuance of credit cards has been on a downward trend for 14 consecutive quarters, resulting in a total reduction of approximately 120 million cards over the past three years, reverting to levels seen in 2018.
Xu Kun (a pseudonym), a finance scholar from Nanjing University, told reporters that the Communist Party of China's concept of internal circulation relies on residents having stable incomes and consumer confidence, both of which are currently diminishing. He remarked, "For ordinary people to feel confident in spending, they first need a stable income and the belief that tomorrow will not be worse. Nowadays, a PhD student is delivering takeout, and college graduates are submitting hundreds of resumes without securing jobs that match their qualifications. Job postings may advertise a monthly salary of 7,000 yuan, but during interviews, candidates often discover the actual pay is less than 3,000 yuan. This amount barely covers rent and food; where is the purchasing power?"
Xu Kun also noted that this year, the number of college graduates in China has reached 12.7 million, leading to increasing employment pressure. He stated, "How can they be expected to spend? You may want to exploit them, but it’s not feasible. I believe the Communist Party is now stuck in a dead end regarding internal circulation and cannot find a way out."
Xu Kun argues that the Chinese Communist Party has been promoting internal circulation for many years, yet persistent issues such as low resident income share, inadequate social security, real estate crises, and unstable employment have not been addressed, making it challenging for consumption to rebound. He stated: 'The essence of internal circulation is not to encourage the public to spend more, but to empower them with the ability and confidence to do so. If income distribution remains unchanged, social security burdens are not alleviated, and local governments continue to extract funds from residents and businesses through fines, taxes, and social insurance, it will be very difficult for consumption to recover.'
Experts: Government neglects resident income
Hong Hao, a stock analyst in Hong Kong and chief economist at the Sire Group, highlighted that China's current challenges are not merely cyclical but stem from a structural imbalance characterised by 'overproduction and weak consumption.' He contends that local governments and policies have historically prioritised investment, production, and exports, while overlooking resident income and consumption capacity. This has resulted in internal competition among businesses, price wars, and deflationary pressures. Hong Hao even suggested that instead of subsidising businesses, it would be more effective to provide direct subsidies to consumers.
Xing Ziqiang, Morgan Stanley's chief economist for China, asserts that the weak consumption in China is closely linked to the sluggish real estate market. For a long time, real estate has been the primary source of wealth for Chinese households. When housing prices decline, it results in a 'negative wealth effect.' This means that even if incomes do not drop significantly, the reduction in household assets can lead to a more conservative mindset, where people are inclined to save rather than spend, thus perpetuating a downgrade in consumption. Xing Ziqiang further noted that China's growth model, which focuses on the supply side (manufacturing and investment), is unlikely to genuinely transition to a 'consumption-oriented' model in the near term.
The World Bank has also highlighted that China is grappling with issues such as weak domestic demand, an ageing population, the lingering effects of the real estate crisis, and a diminishing sense of security among the middle class. The World Bank contends that relying solely on short-term stimulus measures is inadequate; more profound reforms, including enhancements to social security, healthcare, and retirement systems, are essential to genuinely boost household consumption willingness.△
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