In mainland China, consumer demand continues to cool, and businesses are increasingly feeling the impact of this change. Merchants and residents in cities like Shanghai and Chengdu have recently reported a significant decrease in customer spending compared to last year. Scholars believe that the public isn’t lacking consumption desire, but rather they are hesitating to spend, indicating that the so-called internal circulation strategy promoted by the Chinese Communist Party (CCP) for many years has failed.
Wenzhou businessman Mr. Liu, who runs a clothing wholesale business in Shanghai, told reporters that customers have become more cautious after the Spring Festival: “Jeans used to sell very well in previous years, most young people liked them, but in the past three to four months, sales have decreased by about 30% compared to the same time last year, and long pants are hardly selling at all. Nowadays, young people are becoming more reluctant to spend money. Many clothing factories are scaling down, some are transferring orders to smaller factories.”
Shanghai resident Ms. Chen, from the Huangpu district, mentioned in an interview that large supermarkets are no longer crowded: “I rarely go to big supermarkets now. I visited the Century Lianhua supermarket near my home yesterday and found it to be very empty. The checkout area used to have long lines, but now there are only a few people. The items in the supermarket are expensive, and ordinary people can’t afford them.”
Ms. Chen stated that many residents are opting for cheaper goods, saying, “Previously, people who used to buy groceries at supermarkets now go to roadside stalls to shop. The clothing stores near my home have closed down and turned into vegetable stalls. The vegetables are cheap, and the business is good.”
According to recent reports from mainland Chinese media citing data from the People’s Bank of China, by the end of the first quarter of 2026, the combined total of credit cards and unified cards decreased to 687 million, a further reduction of 9 million from the end of 2025. Since reaching a peak of 807 million cards in the third quarter of 2022, the issuance of credit cards has declined for 14 consecutive quarters, with a cumulative decrease of approximately 120 million cards over three years, returning to the level of 2018.
Mr. He, a resident of Chengdu, mentioned that the number of stores in the area is also decreasing: “Chunxi Road is the most vibrant commercial street in Chengdu. It may seem crowded at first glance, but when you enter a store, you’ll find that there are many people looking around but very few actually buying. Even in other clothing stores, there are few people entering. The current economy is really in a mess.”
Mr. He expressed his frustration, saying, “During Premier Li Keqiang’s term, he proposed the street vendor economy, which was later denied by the central government. Now, even the street vendor economy cannot be promoted. Platforms like Taobao and Jingdong rely on policy support to crush the businesses of ordinary people. I came across a video where a boss was angrily criticizing Taobao for monopolizing business and making it difficult for physical stores to survive.”
In recent years, the CCP has continuously called for expanding domestic demand and made the so-called internal circulation a key economic policy focus. Several interviewed business figures mentioned that poor employment, unstable income, declining property values, and high social security pressures have led many residents to prefer saving money. Business owners are also hesitant to make long-term plans and can only proceed cautiously.
Xu Kun, a finance scholar who graduated from Nanjing University (pseudonym), told reporters that the premise of the CCP’s internal circulation strategy is that residents have stable income and consumption confidence, but currently, both of these conditions are weakening. He stated, “Merely chanting slogans about internal circulation won’t make it happen. For ordinary people to spend money, they need not only stable income but also to believe that tomorrow won’t be worse. Nowadays, a doctoral student delivers food, and university graduates send out hundreds of resumes without finding a job that matches their qualifications. Job postings offer a monthly salary of 7,000 yuan but in the interview, they find out it’s less than 3,000 yuan. With this little money to pay rent and eat, where does the purchasing power come from?”
Xu Kun pointed out that this year, the number of graduates from Chinese universities has reached 12.7 million, further increasing the pressure for employment. He remarked, “How can they dare to consume? You can’t squeeze them dry. I believe the CCP is now stuck in a deadlock with internal circulation and unable to break free.”
The CCP’s flagship publication, Qiushi Net, has been consistently publishing articles on internal circulation this year, making “strengthening domestic circulation” the central economic policy for the beginning of the “14th Five-Year Plan.” However, these articles also acknowledge issues such as “strong supply and weak demand,” insufficient domestic demand, challenges for business operations, and pressure on employment and income growth. An article on May 21 on Qiushi Net titled “How to View the Contradiction of Weak Demand in the Face of Strong Supply” mentioned that residents’ income expectations are weak, leading to an increase in precautionary savings, affecting consumer confidence and capability, making it difficult for domestic demand to compensate for the lack of external demand.
Xu Kun believes that despite the CCP’s promotion of internal circulation for many years, issues like low income share for residents, inadequate social security, a real estate bubble, unstable employment, etc., remain unresolved, making it challenging for the consumption side to recover. He said, “The core of internal circulation isn’t just about getting people to spend more but ensuring that people have the ability and confidence to spend. If income distribution remains unchanged, social security burdens don’t decrease, and local governments keep demanding money from residents and businesses through fines, taxes, medical insurance, and social security, consumption will struggle to rise.”