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.
Rail cargo gauge
And for those economists who track rail cargo volumes as a reliable gauge of China's economic health - along with bank lending and power generation - Qiqihar, a city of close to 6 million people, may offer some early warning signals. Qiqihar Railway Rolling Stock, a subsidiary of state-owned China CNR Corp, has had no new orders for its freight cars for a couple of months, a company official said, forcing it to idle its plants and leave up to 10,000 workers on subsistence wages.
That could be cause for concern in Beijing where the government reckons China needs the economy to be humming along at least at 7.2 percent to keep employment steady - and ensure social stability.
Growth in Heilongjiang may have already slowed to below a tacit threshold set by the central government. In August, Beijing announced renewed measures to boost the economies of its three northeastern provinces, with state-owned enterprises already expected to invest an estimated $164 billion in neighboring Liaoning province.
"Should you shore up growth by pumping in more money?" says Louis Kuijs, Greater China chief economist for RBS in Hong Kong. "Probably not."
In a new commercial district just south of downtown Qiqihar, International Hardware and Building Materials City officially opened for business last month.
On a recent sunny weekday afternoon, not one customer was in sight at the 300,000 square meter open-air mall, northeast Asia's biggest hardware supplies market.
Developer Qiqihar China Focus City says 80 percent of the 1,150 storefronts at the new mall are sold, but elaborate flower arrangements set behind padlocked doors are a stark reminder of the city's pain. The mall was built on the understanding that the municipal government will close existing hardware supplies markets downtown, which it has yet to do. Meanwhile, construction activity fell nearly 5 percent in the first half of this year, following a drop twice that size last year.
While the area's heavy industry has weakened and exports are down by more than a quarter, the services sector is holding up, though retail growth lags the national rate. Even with construction in decline, cranes still dot the urban landscape, and real estate investment is up. Light industry is booming, up 17.4 percent from January to August.
Crucially, there are no signs of labor unrest on the bustling streets. Qiqihar's official jobless rate last year was just 3.7 percent.
In a July report, Moody's predicted that if China's growth slowed to 5 percent, it would knock 0.9 percentage points off Asia-Pacific growth and 0.3 percentage points off global growth. That may be some way off. Li Pumin, general secretary of the National Development and Reform Commission said this week he was confident China can hit its annual growth target of around 7.5 percent this year.
In Qiqihar, industrial manufacturers wrestle with more immediate concerns.
Lei Ang Heavy Industry, a machine-tool maker with a small factory in a development zone south of the city, said it has no manufacturing orders and will need to come up with new products just to compete. But, given what it has invested in facilities, said the factory director who gave his name as Dai, it can't afford to move into light industry manufacturing.
Nor can it really afford to let go of its few dozen workers. "Comparatively speaking, for this industry, these workers are very good," said Dai. "If you lay some off now, it's really hard to find new ones when things turn around. Young people aren't very willing to enter the industry."
At Qiqihar No. 2 Machine & Tool Works, one of China's top machine-tool makers, new orders have dropped 10-20 percent compared to last year, with a fifth of the company's workforce, or 800 people, idle, said an employee named Zhao. He said the weak coal and steel sectors meant local customers were delaying equipment upgrades, and government subsidies have reduced to a trickle.
Higher transport and heating costs mean it struggles to compete for orders with competitors in the south.
That has forced Qiqihar No. 2 to think about shifting downstream, and consider everything from initial factory design to post-sales support. "We want to develop towards the high-end," Zhao said, "and turn from manufacturing to services."
But that's not always profitable either, in the current climate. ShengBei, whose margins on selling others' construction equipment have been pummeled, has bought a plot of land to build a factory to make its own cement mixers and move upstream, said Han, the service manager.
"We can build the easy equipment," he said.