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Wanted posters for fugitive debtors, not commercials, are the main images that flash up on a big electronic screen in downtown Yixing, in the heart of the faltering Chinese industrial powerhouse that is the Yangtze River Delta.
The posters, from the local courts, show the identity card numbers and pictures of dozens of people who have fled unpaid debts. Rewards ranging from 20,000 yuan (HK$23,000) to 330,000 yuan are offered to anyone reporting their whereabouts.
But Hengsheng Square is the glitziest part of Yixing – with the most luxury stores, the brightest lights and the priciest office buildings – and few passers-by, their attention directed elsewhere, heed the wanted posters. They have little novelty value in any case, with the "runaway debtor" phenomenon now just part of daily life in the small city as economic growth slows.
In many ways, the square stands as a metaphor for the overall health of the Chinese economy. Under a prosperous surface, deep cracks have begun to emerge in its investment-led model, casting a shadow over the country's economic growth prospects and even giving rise to doubts about the fundamental soundness of the world's second-biggest economy.
"The economic dynamics are waning," said Professor Hu Xingdou, an economist at Beijing Institute of Technology. "China's economic growth in recent years was powered by massive money printing, which is dangerous and unsustainable."
Like many places in China, Yixing, in the eastern province of Jiangsu and a 2½-hour drive from Shanghai, is struggling to cope with weakening demand, rising wages and widespread industrial overcapacity. Its gross domestic product growth rate – 7.2 per cent last year – has almost halved in the past decade, exposing financial strains and prompting painful consolidation.
Runaway bosses are just a symptom of its economic woes. Behind every wanted poster on the big screen, there's the story of a bankrupt factory, a business that's gone bust or an investment chain that's collapsed.
"Companies at the low end of value chain are facing a big crisis as they are engaged in industries saddled with overcapacity and are discriminated against by lenders which favour their state-owned counterparts," Hu said. "Whether private companies can survive the bitter transformation will be crucial to China's economic prospects."
At the same time, many Chinese entrepreneurs are trying to find a way out by investing in the future, shifting from state-owned partners to consumers, and turning away from property to projects inspired by the government's internet plus strategy, which is designed to integrate mobile internet, big data and cloud computing for manufacturing.
When Wu Qiang spent 500 million yuan to take over a Yixing cement plant with annual output of 2.4 million tonnes in 2010, following his father into the cement industry, he thought he was buying into a money-printing machine. It was the heyday for the construction sector, when China was still rolling out a massive fiscal stimulus programme, and banks were pumping out money to finance roads, bridges, new residential blocks and factories.
The demand for cement was unprecedented and in the three years after Wu made his investment, China used more cement than the U.S. used in the entire 20th century.
Wu, 40, remembers the "waterway traffic jams" created by cargo boats as they queued at his factory's riverside dock before ferrying bags of cement to construction sites. Nowadays the price of cement is only about half its 2010 peak and just two or three boats can be seen loading bags at the dock.
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But he's determined to survive the downturn and, using money accumulated during the good times, has spent 16 million yuan on desulphurization facilities this year to meet stricter environmental regulations. He's betting his competitors won't be able match him.
Such investment is badly needed in an economy losing steam quickly as capital spending from the private sector stagnates. Not many private investors today dare put down money for future business.
According to China's latest bank credit data, mainland companies repaid more loans to banks than they borrowed from them in July, resulting in a net fall in new corporate loans, and companies with cash are content to just sit on it.
Liang Hong, an analyst at China International Capital, said the hoarding of cash was a reflection of the "uncertainty trap" faced by entrepreneurs as Beijing's efforts to balance policy between structural reform and growth stabilization blurred investment prospects and the market fretted about the possibility of abrupt monetary, fiscal or industry policy changes.
Qian Fei, the owner of Yixing axle maker Lingfei Forging, is one entrepreneur who has decided against embracing the uncertainties of investment in a new project. Instead, he plans to trim back his business after having his fingers burned by a poor investment decision made in 2013.
Trotting from one workshop to another in the 15 hectare plant, Qian, 35, stopped from time to time to discuss work details with workers on a hot summer day. He majored in chemical engineering, the family business, at university and is proud he was able to learn all about forging after deciding to invest 300 million yuan in the plant, which makes axles for use in wind, hydroelectric and thermal power plants and other machinery.
He said he invested in the plant because he regarded other investment options, such as lending money to local government agencies for infrastructure projects as "insane".
When the plant opened, things were looking good as orders flowed in, but he was in deep trouble just a few months later.
"I found I had stepped into a nightmare – most of my buyers are state-owned enterprises (SOEs)," he said. "Asking them to pay for what they've bought just seems like a tough battle."
It was even hard to get hold of the right telephone number to demand payment. "SOE bureaucracy is a big headache," Qian said.
To make matters worse, the SOEs are also feeling the pinch, with most of those involved in power generation saddled with overcapacity problems.
In the first seven months of this year, there were 38 instances of default by 18 bond issuers on the mainland, six of them SOEs. The defaults involved 24.8 billion yuan, more than double the total for the past two years combined. And while only a third of issuers in default this year were SOEs, they accounted for about two-thirds of the amount in default.
"I'm not sure if my [state-owned] buyers have financial troubles," Qian said. "It's just hard to get a penny from them. Taking that as a lesson, I will shy away from any industry where buyers are SOEs."
Fortunately, his other business, producing chemicals used in household products, is doing well in a niche market. "I will focus on this field and invest millions of yuan every year in research and development in the hope of launching new products some day," he said.
While the gradual shift in the economy's center of gravity from state-owned businesses to consumer-oriented, innovative ones offers a solution to Qian, there seems no easy way out for 28-year-old Yixing property developer Shi Yunpeng, who took over his father's company four years ago after earning an MBA at the University of Manchester, in Britain.
"I haven't started any projects in the past three years after seeing the high vacancy rates for properties even in prime locations," Shi said.
He pointed out the few lights flickering along a shopping street named Golden Street early one weekday evening. No water was spurting from a fountain in the middle of the street and there were no children playing on a merry-go-round. Some shops were for rent, while others were for sale at 50 per cent to 70 per cent of the prices their owners paid just two years ago.
"Demand has been overwhelmed by the massive city creation games," Shi said. "I will stop the property business and look elsewhere."
Some friends had suggested an online gardening service that would help clients grow small but expensive indoor plants, tapping into changing lifestyle trends among wealthy and middle-class Chinese.
"Serving a lucrative niche market is the direction of a consumption-led economy in the internet era," Shi said. "I will give it serious consideration."
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