Never Seen Economic Crash Hits ChinaAll Consumer Sectors Dead Even Michelin Restaurants Struggles

Signs indicate China's economy is struggling across industries, especially consumer-focused sectors, where bankruptcies are widespread. Those still operating are seeing sharp profit declines. One example is the viral self-heating hotpot brand Zihai Guo, which recently filed for bankruptcy. Its parent company, Hangzhou Jingling Yang, also owes more than 140 million yuan. From 2018 to 2021, Zihai Guo completed five rounds of funding and was once valued at 7.5 billion yuan, attracting investments from firms like CICC and Matrix Partners. Reports say Zihai Guo relied heavily on aggressive marketing during expansion. Marketing expenses once made up over 40% of costs, while R&D was under 1.3%. In 2020, the company earned 958 million yuan, but spent 293 million yuan on sales, losing 151 million yuan. By 2021, sales expenses rose to 431 million yuan, and losses grew to 314 million yuan. By 2024, the company was forced to pay 11.25 million yuan to Focus Media for unpaid advertising, and its founder, Cai Hongliang, faced repeated restrictions on high spending. Why would a company with hundreds of millions in venture capital burn through cash so fast and go bankrupt? Analysts say it's tied to Zihai Guo's aggressive expansion model. But most agree it also reflects China's broader economic slowdown and weakening consumer demand. Another trendy food brand following a similar path is Zhong Xue Gao Chai Ice Cream. In July 2025, Zhong Xue Gao filed for bankruptcy due to insolvency. On May 7 this year, the company sold 508 intangible assets for 21.1 million yuan. Its founder, Lin Sheng, came from the advertising consulting industry. He had handled marketing for ice cream products like Maedel and Zhongjie 1946. In 2018, he launched his brand on Tmall, rolling out multiple ice creams priced above 50 yuan, backed by major investors like Fengrui Capital, Matrix Partners, and Genfund. Riding the wave of the new consumer trend and leveraging strong marketing on platforms like Douyin and Xiaohongshu, Zhong Xue Gao's annual sales surpassed 1 billion yuan in just three years, with a valuation approaching 4 billion yuan. It was once called the Hermes of ice cream. But things quickly took a turn. Starting in 2022, value-for-money options became the trend, hitting Zhong Xue Gao's core market. Lin's insistence on using high prices earned him the nickname Ice Cream Assassin. A video went viral showing the product not melting for over an hour at 31 degrees Celsius. This sparked a trust crisis among consumers. Negative news followed, like unpaid wages, and the brand's reputation collapsed. By 2024, Zhong Xue Gao was burdened with debt and could barely continue. Lin even resorted to selling sweet potatoes on live streams to pay off debts. By mid-2025, Zhong Xue Gao and several affiliated companies had all filed for bankruptcy. The broader picture shows China's post-pandemic consumer market has struggled for three years, with multiple industries collapsing. According to statistics from Wingsheng, over 180 major Chinese brands closed stores in 2025, totaling more than 1,500 locations. Restaurants made up over 50% of these closures, and nearly 80% of brands either closed multiple locations or exited entirely. Public data show that the average lifespan of restaurant outlets fell from 2.1 years in 2015 to just 15 months in 2025. A recent white paper on China's chain restaurants reported that 3.39 million outlets in the Meituan system were marked as closed in 2025, a 9.4% increase from 2024. Among these closures, 23.8% were new outlets that had opened in 2025, and 41.3% opened in 2024. Together, nearly two-thirds of cleared outlets had been in operation for less than two years before forced out by competition. At the same time, per-customer spending in restaurants has been falling. The trend has spread from high-end dining to mid-range, mainstream, and even fast-food brands, creating industry-wide price pressure. In the third quarter of 2025, average per-person spending nationwide was 33 yuan, down 23.6% from the previous two years. Among 45 major cities, only Beijing exceeded 100 yuan per customer, while 80% of cities fell below 50 yuan. Remarkably, dine-in spending has returned to 2015 levels, effectively devolving by 10 years. Closures affected not only new businesses operating for less than two years, but also longstanding brands with decades of history, such as Beijing's Shunfeng Restaurant, Nanjing's Republic Red Mansion, and Shanghai's Shanghai Old Restaurant. Some of China's longstanding tea and coffee brands have sharply contracted. Chicha Sanchen, once called the Michelin of tea drinks, dropped from over 200 stores on the mainland to just two. Celebrity-backed Cha For You closed its flagship and now operates only two stores. The Korean-style coffee chain Manor Coffee, which was known for its slow space concept, exited Shenzhen, dropping its store count by half. Cafe Laku Coffee, after more than a decade in business, shut multiple landmark stores in Guangzhou. 813 Bai Yishan, hailed as a pioneer in new tea drinks, exited Guangzhou and closed its Shenzhen flagship. Even Coco, with nearly 30 years of history, closed over 400 stores in six months. The longstanding chain Jidong Grass Jelly fell below 1,000 locations. Newer brands have fared no better. Cha Bai Dao's coffee store, Grey Cafe, and viral milk brand, Pink Shake, didn't survive more than two years. Three Bro Factory, once selling 1.5 million yuan per month at a single store, went from boom to bust in just four years. Foreign-themed restaurants are also seeing rapid shakeouts. Tai Chi Burger, less than a year old, closed all its dozen locations. Shanghai restaurants EHB and Street Korean BBQ announced exits. Pioneering Thai-style tea cafes like Thai Food Show, Thai-style street food spots like Miniya, Michelin-recognized Star Leaf, and Meow BBQ all saw dramatic downsizing. During this year's May Day Golden Week, the restaurant industry had hoped for a business boost, but reality fell short. Many workers reported the slowest traffic ever, with stores nearly empty. One respondent said they had never seen such a bleak scene in their career. The slump isn't limited to restaurants. Nearly every industry is affected, and both rich and poor consumers are cutting back. Retail is also struggling. According to data from Wensheng, more than 60 chain restaurants closed stores in 2025, mainly supermarkets, beauty and personal care, luxury goods, and multi-brand fashion stores. Over 63% of closures were mid-range or mass-market brands. Icons for younger generations like Hong Kong brand Manning's and open display chain Sasa suddenly left the mainland. Watson's, the pioneer of multi-brand beauty retail, retreated from multiple core locations in first-tier cities, reaching a seven-year low in store numbers. Japanese brands like Menard and Sekisei, as well as Korean brand Innisfree, fully withdrew from China. Supermarkets have also suffered. Changzhou's community fresh market Xingcheng Yuanwei closed all its locations. Hubei retailer Zhongbai Warehouse shut more than 20 hypermarkets due to losses. Yonghui Supermarket reported negative net profits for five consecutive years, cutting its store count by half. Luxury and home goods brands faced major challenges. In 2025, nearly 10 luxury brands drew attention with closures. Lanvin exited multiple high-end malls nationwide. Tiffany & Co. left Yunnan after 14 years. Gucci closed at least six stores, exiting Guiyang. Giorgio Armani shuttered stores in Beijing's China World Mall and Qingdao Hisense Plaza after more than a decade. Even county-level Muji and Sanfu closed multiple locations in Chongqing, Shanghai, Fuzhou, and Changsha. International apparel brands are struggling. Triumph, once called the queen of store clerks, has closed all its stores in China. Korean trend brand Mardi Mercredi, famous on social media for its signature daisies, and European high street brand & Other Stories, have also exited or cleared out. Oysho, once praised as one of the most fashionable sports brands, has exited as well. Many favorite women's labels, like Teenie Weenie, saw revenues drop, with more than 140 stores closing in just nine months. Training institutions for all age groups are facing survival challenges. Barbara International Dance, a well-known dance school with over 10 years in business, suddenly closed multiple franchise stores in Guangzhou and Foshan due to poor management. Bell Robot, which had expanded to over 20 cities, shut its national headquarters and exited the Sanya market. Tongcheng Tongmei, China's first publicly listed children's programming company from the U.S., now has fewer than 10 operating locations. British early childhood swimming school Water Babies, having operated in China for nearly 10 years, no longer has any active outlets. Basketball training leader E-Star shrank from 1,000 stores at its peak to just over a dozen. Industry benchmarks have also fallen. Mysore U Plus Yoga closed over 10 locations in four months and exited Wuhan. SKD International Art Education, a high-end study abroad service provider for 10 years, disappeared. Will's Fitness closed its last store and went under completely. The pet store sector is seeing a rapid shakeout. Petfresh burned through $25 million in angel funding in just six months, and all 18 of its stores, operating less than nine months, shut down. JackPet, backed by new Ruipeng Pet Medical Group, now has only one store left. LookStar suddenly declared bankruptcy and closed. The trend of businesses disappearing has also spread to healthcare. Love Home Postpartum Center, which had acquired the high-end maternity center Ruilin Yi and Fosman Dental, specializing in invisible teeth correction, both saw all their locations close overnight. In jewelry, China's large chain brand Chaotai Song saw first-quarter revenues drop nearly 27% year-on-year. The company said rising international gold prices suppressed consumer spending on jewelry. Downstream franchisees faced weak demand and low willingness to restock, prompting widespread inventory reduction. The industry continues to face major pressure. Classic jewelry brand Lao Feng Xiang has more than 170 years of history. But both its revenue and profit have fallen steadily over the past two years, while store numbers keep shrinking. After cutting 483 stores in 2025, it closed another 185 stores in the first quarter of this year. The tourism sector, often seen as a booming industry, also hides risks. While holidays were expected to bring in large profits, over the past two years, tourism and cultural companies with high leverage expansion, heavy assets, and weak operational capacity have increasingly exposed risks. A silent storm has swept through the industry. Since 2026, at least seven tourism and cultural companies have entered bankruptcy or judicial restructuring. These seven companies span local state-owned enterprises, large cultural tourism complexes, private resort groups, and cross-industry tourism players. Many were once high-profile star projects, including cultural giants with assets worth tens of billions, national 4A scenic spots, and clusters of high-end hotels. Additional companies that filed for bankruptcy this year are not yet recorded. China's domestic auto market is also shrinking sharply. Data from the China Passenger Car Association show that in April 2026, retail sales of conventional fuel vehicles in China totaled just 530,000 units, down 37% from a year ago, and 33% lower than in March. The EV market is also showing signs of weakness. Retail sales of electric vehicles in April showed 849,000 units, down 6.8% year-over-year, and 0.3% from March. From January to April, cumulative retail sales totaled 2.758 million, a 17.2% drop compared to the same period last year. In April, total domestic passenger car retail sales were 1.38 million units, down 21.5% year-over-year, marking the seventh consecutive month of decline. In the first four months of the year, cumulative domestic sales reached 5.6 million units, down 18.5% year-over-year. Faced with weak domestic demand and excess capacity, China's auto market shows a pattern of cool at home, hot abroad. Automakers increasingly rely on exporting cheaper vehicles overseas. At the same time, Chinese EVs are encountering rising tariff and overcapacity disputes from Europe, the US, and Japan. Health-related consumption is also under pressure. Since the fourth quarter of 2024, China's pharmacy industry has seen waves of closures. In 2025 alone, the country's pharmacies dropped by 22,000, with small and midsize stores exiting particularly fast. Entertainment consumption is struggling, too. According to China's National Film Administration, the average nationwide movie ticket price on the first day of the May Day holiday this year was 36.3 yuan, down from 40.1 in 2023, 40.5 in 2024, and 39.5 in 2025, the lowest for the period in four years. On May 15, China's state broadcaster, CCTV, announced it had secured the broadcasting rights for the FIFA World Cup. But it did not disclose the price, prompting questions online. Sources say the rights cost 60 million US dollars. FIFA's initial asking price for CCTV ranged from 250 to 300 million US dollars, while CCTV's budget was reportedly only 60 to 80 million dollars. Even after multiple rounds of negotiations that reportedly lowered the price to 120 to 150 million dollars, it remained far above CCTV's expectations. Observers have suggested that CCTV's inability to pay the original price reflects China's economic slowdown and tight fiscal conditions. Many mainland internet users noted that consumer spending is weak, and most people are struggling to make ends meet, leaving little interest or money to watch the World Cup. Some internet users commented, People aren't spending on entertainment anymore. Survival comes first. In 2019, 2023, and 2024, total box office revenue for the May Day holiday hovered around 1.5 billion yuan. In 2026, it barely passed 700 million. Cut in half, just like housing prices. Young people used to spend first and think about the future later. Now it's about surviving first and then enjoying life. Another said, The key is, people under 30 aren't really into soccer, and many in their 40s are already laid off, unemployed, or worried about losing their jobs. Who has the headspace to watch football? China's real estate sector is the heart of suppressed consumer spending. The property market has been in decline for years. Data released in early April 2026 by the China Index Academy shows that the slump continues. Prices of new homes in 70 cities fell 0.2% month over month. In 100 major cities, the average price for second-hand homes was 12,792 yuan per square meter, down 0.34% from the previous month and 8.55% year over year. In these 100 cities, newly built home sales in March dropped 13% year over year, with first-quarter cumulative sales at about 45.67 million square meters, down roughly 22% year over year. In the top 20 cities, second-hand home sales totaled about 148,000 units in March, down 2.5% year over year, with first-quarter cumulative sales at 333,000 units, representing a 4-6% drop. The Economist warned that new home prices have fallen to a 10-year low, but there will be a 40% more decline ahead, with this crisis potentially stretching through 2030. For over a decade, the real estate sector boomed, supporting developers, agents, construction, design, and countless other jobs. Now, the industry has fully entered a deep freeze. Demand has collapsed, major property firms face financial stress, and layoffs are widespread. China's domestic economy is weak, with little hope for recovery. Wage disputes erupt across the country, social unrest grows, and indiscriminate attacks are increasingly reported. Commenting on the situation, US-based political analyst Chen Po-kong has said that Xi Jinping's mismanagement has been the main cause of China's economic collapse. He stated that political control has effectively broken down. The party, the military, and the public have lost confidence. Xi's policies, including the prolonged COVID-19 lockdowns, sweeping internal purges, and concentration of power, have alienated the party, the military, and the people, driving China's economy into ruin.