Is the decline of traditional Wushu really because fighting is not allowed after the founding of the People's Republic of China?

No, traditional Wushu has long lost its actual combat ability, since the Republic of China. At that time, the leaders of various factions had to talk and scold each other every day. In Macao, the leaders of the two factions fought and finally showed their true colors. They played for a few minutes, all of which were tortoise punches, just like ordinary people.