China's Consumption Crisis 1 Billion Stop Spending 50B Stimulus Can't Save Economy

This is Zhengzhou railway station. There are so many homeless people in Zhengzhou. You see them in Laoyang and Zhengzhou too. What's going on? What am I supposed to do? I honestly feel like I can't go on anymore. I'm 35 years old and I feel like I can't make any money. I really do. It feels like living in this world has become so difficult. Oh my god. This is absolutely heartbreaking. I used to not believe that young people were actually picking food out of the trash cans to eat. But today, I really saw it with my own eyes. This whole family cannot even find one person with a job. Other countries have the Avengers. We have the Unemployed Alliance. In an ordinary fast food restaurant, a scene unfolded that caught people's attention. Two young women ordered their meals and sat down to eat. Not far away, three unfamiliar men stood nearby the entire time. After the two women finished eating and left, the three men immediately walked over. Without hesitation, they picked up their leftovers and began eating it. These scenes showing ordinary people struggling to survive reflect the broader changes in China's overall economic environment. According to the latest data, China's total retail sales of consumer goods fell 0.6% in May year over year. This is a significant warning sign. Since China lifted its COVID lockdown restrictions at the end of 2022, consumer spending had not recorded negative growth for more than three years, but this time it fell into negative territory. State media described the decline as an optimization of consumption patterns. However, the numbers suggest another reality. Retail sales in Beijing fell 6.2% year over year. Shanghai declined 4.7% and Shenzhen dropped 4.5%. These three cities represent some of China's strongest consumer markets, highest income levels, and largest concentrations of middle-class households. But now even these major cities are experiencing simultaneous declines. This is not consumption upgrading. It's a collapse in consumer demand. On the surface, a decline of 0.6% might not appear severe, but the problem is that this is a nationwide aggregate figure. Behind the number are the real hardships faced by ordinary people. Someone posted a video saying that now he eats only one meal a day. At night, he goes to supermarkets to buy food that is close to its expiration date or on discount. That one meal is all he eats for the entire day, and he spends no more than 10 yuan each day, which is about 1.5 US dollars. As long as he doesn't starve to death, that's enough. There are many people like this. They even have a group where they share ways to spend the least amount of money possible just to maintain basic survival. The group consists mostly of low-income workers, gig workers, and people in debt. Most of their income comes from temporary jobs and part-time work. Some collect garbage and sell recyclables. After paying unavoidable expenses like rent, electricity, and water bills, they have almost nothing left. So they cut their food costs as much as possible. Some cannot even afford to rent a place to live. Sleeping on the streets or in parks has become normal for them. Their bottom line is simply staying alive and not starving. Running a business is really difficult now. At least 90% of the physical stores on this street have closed down. I'm not exaggerating at all. There are many streets like this. It's terrifying. You can see stores closing down or looking for buyers everywhere. It's also hard to find jobs now. With unemployment so high, why aren't the people in charge worried? The news never reports any of this. Are they just giving up completely? How are ordinary people supposed to make a living? My daughter has been asking for pork ribs for several days, but I don't have the money. Today, I sold this TV that used to hang here. I only got 50 yuan for it. I used that money to buy some pork ribs for her. Daughter, hurry up and eat. Dad will just eat yesterday's leftovers. Currently, the hardest hit area in China's consumer sector is the automobile market. According to official data, automobile sales have fallen by more than one-sixth. Home appliance sales have dropped by more than one-seventh. And spending on renovation materials has also declined sharply. Almost all major categories of big-ticket goods have collapsed. I was born in 1982, and I've been unemployed for half a year. I haven't had a job or income for six months. I can't hold on anymore. Today, I made the decision to sell the car that has been with me for more than 10 years. I can barely afford to drive it now. I can't even afford the gas. Every year, I still have to pay for insurance and vehicle inspections. I really can't keep going. Just days ago, a Chinese auto dealership group that ranks among the country's top 100 dealerships was reportedly forced to cut salaries and suspend some wage payments due to major losses. On July 7, a notice issued by the dealership circulated online. The notice said the group suffered heavy losses from April to June. Investors were reportedly no longer able to continue relying on loans to pay employee salaries. As a result, the company decided that all managers and above in loss-making divisions would receive no salary for July. Employees below the manager level would have their July salaries reduced by 30%, receiving only 70% of their normal pay. The same policy applied to the group's headquarters. Managers and above would receive no July salary, while frontline employees would receive only 70% of their wages. In other words, the downturn in China's auto dealership industry is no longer limited to falling sales. The pressure has now directly reached employees' paychecks. Behind this is the broader crisis facing the entire automobile dealership industry in China. According to a survey by the China Automobile Dealers Association, during the first half of this year, only 12% of dealerships nationwide actually achieved their sales targets for the six-month period. Out of 100 dealerships, only 12 would have barely met their goals. Another 11 would be struggling to reach 90 to 100% of their targets, while nearly 77 would have failed to meet their targets. Even more concerning, nearly 40% of dealerships have failed to achieve even 70% of their sales goals. The profitability situation looks even worse. In 2025, the percentage of Chinese auto dealerships that were actually profitable fell from 39.3% in 2024 to just 23.5%. In other words, in the past, about 4 out of every 10 dealerships would still make money. Now that number has fallen to just over 2 out of 10. About 20.8% of dealerships broke even, while loss-making dealerships accounted for 55.7%. That means that more than half of auto dealerships are no longer making profits. They're losing money just by staying open. Even more severe, among the top 100 dealerships in the industry, only 11 had positive gross margins on new vehicle sales. Even the industry's biggest players are mostly no longer making money from selling cars. The average gross margin on new vehicle sales has fallen to negative 10%. This means that the more they sell, the more they lose. When an industry declines, the pressure eventually reaches employees. In 2025, the total number of employees at the top 100 auto dealerships fell to 320,000, down 9.1% year-on-year. Total payroll expenses dropped even more sharply, falling 28.6% year-over-year. This is not simply a normal business adjustment. It reflects an entire industry shrinking, cutting jobs and reducing salaries. China Automobile Dealers Association Deputy Secretary General Wen Zijin also acknowledged that dealerships have been facing extremely difficult conditions over the past two years. New vehicle prices have fallen below dealership costs. Inventory has piled up in warehouses, tying up large amounts of capital. Meanwhile, rent, labor and operating expenses remain unchanged. At the same time, automakers continue to impose sales targets on dealerships. After May consumption data was released, the Chuxiu Journal website, a publication affiliated with the Chinese Communist Party, published an article acknowledging that Chinese residents' willingness to spend has been limited by three major factors, employment challenges, insufficient social security and falling property values. The article said that some residents are facing significant pressure from employment and income, which has weakened their willingness to consume. More importantly, it called for accelerating the repair of household balance sheets, stabilizing the real estate market, and preventing falling asset prices from further damaging consumer confidence. The phrase repairing household balance sheets is essentially an official way of acknowledging that many families are already facing financial difficulties. In other words, even state media is now suggesting that household consumption in China is no longer strong enough to drive the economy. What's even more ironic is that the 2026 Government Work Report proposed launching a special campaign to boost consumption. The government planned to allocate 250 billion yuan in ultra-long-term special treasury bonds to support trade-ins for consumer goods, and another 100 billion yuan in fiscal and financial funds to stimulate domestic demand. But even after spending 350 billion yuan, total retail sales of consumer goods still declined in May. Because the root problem is not that ordinary people lack coupons or one-time subsidies. There's a deeper issue with the entire income distribution structure. The money has not truly reached ordinary households. A food delivery driver in Beijing recounts how his wages were reduced. When I first came to Beijing, I told myself I had to make at least 300 yuan every day. I had to earn 300 yuan a day. But after the Chinese New Year, things got worse day by day. Every day was worse than the last. I wanted to buy a home, even if it meant paying a mortgage. I just hoped my child could live in a new house instead of renting an old, run-down school district apartment and climbing up the seventh floor every day. Today, I'll show you what my life has become. I'm 36 years old, and I never imagined I would end up homeless, with nowhere to turn for help. My company went bankrupt, my house and car were both used as collateral, and now I'm more than 2.6 million yuan in debt. How extreme is the job market in Shanghai? A job paying before-tax 6,000 yuan a month requires you to be fluent in both English and Japanese. Some companies even openly state in their job listings that they will not provide social insurance during the probation period, and later, they still do not pay social insurance based on the actual salary. But the most outrageous thing is this. Job offerings only 3,000 to 4,000 yuan a month are asking for people with 10 years of work experience and even PhD degrees. How should I put it? This is what the job market has become. Looking for a job is like fighting over scraps. Those who fail to get them will starve. The Beijing authorities and some economists often use one figure to reassure themselves. Chinese household deposits have reached 167 trillion yuan, or about 120,000 yuan per person. Their argument is that Chinese people are not short of money. They simply don't want to spend. With the right policies and some confidence-building measures, consumption will recover. But this is the biggest misconception. An average hides the reality of wealth distribution. A small group of high-income households controls a large share of deposits. They only need to spend a small portion of their income to maintain a high level of consumption. But the ordinary people who actually support everyday consumption often have very little savings. For most families, daily expenses depend on wages. Buying a home, a car, or other major purchases depends on borrowing. The so-called 160 trillion yuan in household deposits has little connection to the real lives of most ordinary people. Much of that spending belongs to a smaller group of wealthy people. It sits in banks, not being spent, but instead being used to generate more wealth. So what do ordinary people actually have? In 2025, Chinese yuan deposits increased by 26.4 trillion yuan, including a 14.6 trillion yuan increase in household deposits. The numbers look huge, but they represent the total amount held by all residents. Spread across 1.4 billion people, and then divided among the roughly 90% of ordinary households, the amount of money people can actually use is extremely small. More importantly, even those who do have some savings often do not dare to spend them. Today, people save money not because they care about earning a little interest. They save because they need protection against unemployment, illness, and unexpected emergencies. So this is not because Chinese people are naturally inclined to save money. It reflects a collective fear of the future. I can say this with confidence. In today's society, 9 out of 10 people probably cannot even come up with 500 yuan, which is about 73 US dollars. This is the third day of our exhibition in Chengdu. Let's take a look at the current situation. Look at my business. There's nobody here. In 2026, the number of new college graduates in China is expected to reach 12.7 million. This doesn't even include the unemployed people who are already searching for jobs. Some people online also claim that China now has more than 300 million people in flexible employment, and that number could reach 500 million by 2030. There have been several sudden death cases reported in the past few days. Honestly, they're terrifying to watch. A 32-year-old software engineer in Guangdong collapsed and died. A 26-year-old engineer in Henan suffered a sudden incident while sleeping. Both of them have been working long hours, staying up late, and dealing with extreme pressure. These are not isolated cases. This is the daily reality for countless workers today. After watching this, I'm really shaken. As financial risks in China continue to grow, an even more significant signal has emerged. For the first time, Chinese financial regulators have taken over a private bank. On July 3rd, the National Financial Regulatory Administration announced that the Wuhan Zhongbang Bank had experienced serious credit risks and would be officially placed under regulatory takeover starting immediately. The takeover period will last one year. Why is this important? Because Zhongbang Bank is not an ordinary small bank. It is the first private bank in Hubei province and the 11th privately owned bank approved for establishment in China. The bank began operations in 2017 with an initial registered capital of 2 billion yuan, later increased to 4 billion. By the end of 2024, Zhongbang had total assets of approximately 123.5 billion yuan. This makes it no longer a small financial institution. It's a significant regional bank. If such a bank encounters problems, the impact would not only affect shareholders and customers, it would also spread to the local financial system. According to the official announcement, the takeover team was led by the Hubei Provincial Financial Management Bureau and the Wuhan Municipal Government. It also included the Hubei branch of the National Financial Regulatory Administration, the Hubei branch of the People's Bank of China, and the Deposit Insurance Fund Management Company. In other words, local authorities, financial regulators, and the central banking system were all involved. Even more notable, Hankou Bank issued an announcement on the same day stating that the principle and interest of individual deposits would be fully protected. In other words, authorities have promised that ordinary depositors' money would be guaranteed. However, corporate deposits and institutional funds do not have the same level of protection. The announcement said that before the takeover, corporate deposits and interbank liabilities of up to 50 million yuan would receive full protection. For amounts above 50 million yuan, they must first be registered. The portion within 50 million yuan will be repaid first, while the excess amount will depend on future arrangements. Put simply, large corporate funds and institutional money may not be fully recovered immediately. The larger the amount, the higher the risk. Financial commentator Mike Lee said that when authorities officially place a bank under takeover, it usually means the bank has already encountered serious problems. The bank may be insolvent or may be facing the risk of a bank run. At that point, government intervention is mainly aimed at preventing panic from spreading and stopping problems at one bank from dragging down other banks, potentially triggering a wider financial crisis. If local government finances continue to deteriorate, the cost of any bailout may ultimately be covered by public resources. How did Zhongbang Bank reach this point? One key reason is that its business model itself carried high risks. Zhongbang positioned itself as an internet transaction bank, relying heavily on online lending and partnerships with loan facilitation platforms. Simply put, unlike traditional banks that mainly collect deposits and issue loans through physical branches, Zhongbang expanded lending through online platforms. This model can appear highly scalable during strong economic conditions. But once regulations tighten, the economy slows, and borrowers are unable to repay loans, bad debts can quickly surge. Independent analyst Guo Tao told Singapore media that Zhongbang Bank's serious credit risks were mainly reflected in a sharp increase in overdue loans, which was closely linked to its loan facilitation business model. In simple terms, money that was previously lent out can no longer be recovered, while the guarantee companies that were supposed to provide backup support no longer have the ability to cover the losses. Another deeper problem is that the private shareholders behind Zhongbang have also fallen into debt troubles themselves. Zhongbang Bank was jointly founded by six companies. Zoll Holdings, Dangdai Group, Yuwantong Technology, Yulong Group, Aoshan Investment, and FASC Energy. However, public reports show that in recent years, amid the real estate crisis and economic slowdown, five of the bank's six major shareholders have experienced debt defaults, equity freezes, or other financial problems. Among them, major shareholder Zoll Holdings has seen several listed companies under its control fall into difficulties. Dangdai Group, which was once ranked among China's top 500 private enterprises, filed for bankruptcy in 2024. Aoshan Group, heavily invested in Wuhan's real estate market, fell into a debt crisis, with its shares frozen by courts multiple times. The equity holdings of the fourth largest shareholder, Yulong Group, were also frozen through legal proceedings. This shows that the situation facing Zhongbang Bank may not remain an isolated case. If more banks begin encountering problems one after another, and each case requires government intervention and financial support, then a much bigger problem could emerge.