Qiqihar, an old industrial and agricultural hub in China's rust-belt northeastern province of Heilongjiang, offers a glimpse of what Beijing is anxious to avoid - the city's economy grew 5.2 percent in the first half of this year.
That's just ahead of the province's 4.8 percent, the slowest in China - where growth nationally has slowed to 7.4 percent after decades of double-digit expansion, and as Beijing re-tilts the world's second-largest economy away from exports and investment and towards domestic consumption.
Heilongjiang shows what can happen when the spigot of debt-fueled investment that has driven breakneck growth is turned down. It also adds to concerns rattling financial markets that China won't be the support for the global economy that it was during the 2008-09 crisis. China's growth then helped the global economy limp through, but the legacy is a crippling debt load that is weighing on China's economy today.
In Qiqihar, investment in fixed assets - primarily plant and machinery - grew 9 percent by August, half last year's rate and well below the national rate of 16.5 percent this year. Investment in "key industry promotion" projects has slumped to just 6.7 billion yuan from 26 billion yuan ($4.25 billion) last year, documents on the city government's website show.
"We're not optimistic about next year," said Han Aixin, the service manager of Qiqihar ShengBei Construction Machinery, which sells mostly cement mixers for local road construction.
Overcapacity in heavy industry coupled now with less investment has ramped up competition and hit margins. Customers pinched by tightening credit are buying less equipment. The number of money-losing companies in Qiqihar has grown by almost a fifth to 80 in January-July, according to the city's statistics bureau. Corporate debt is up 13 percent. Losses at China First Heavy Industries, a national champion state-owned enterprise based in Qiqihar, ballooned 74 percent to 667 million yuan in the first half.
"As China's economy has slowed, its leaders have become more aware of the problems associated with over-investment and overcapacity and have tried to slow the flow of investment," said Mark Williams, chief Asia economist at Capital Economics in London.