China's Middle-Class Dreams in Peril

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But the perils of previous excesses are also more evident here: There is too much debt, too many factories and too many vacant apartments.

Like many Chinese cities, Xinxiang built industrial parks, ornate bridges and six-lane roads during China's boom years... The idea, widely embraced, was that its growth would turn its residents into stronger consumers.

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Residential towers in various stages of construction spread out from its city center. A new development area has almost no traffic on roads abutting huge empty lots. Whether the city's many empty industrial zones that have sprung up over the last dozen years, some the size of small airports, will ever be filled is now an open question.

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Zhao Cui'e, chief executive of Xinxiang City Dacrotized Metals Coating Co. says some state-owned home-appliance or auto-parts makers delay payment for up to 11 months after placing their orders. "What small company can afford to lay out millions of yuan to support these big companies," said Ms. Zhao.

Meanwhile, Xinxiang's aging factories for iron, steel and polyester fiber--the ones whose role is supposed to shrink under China's new growth model--continue to pump out unwanted inventory with the help of cheap credit, said Yang Yuzhen, a business professor at Henan Normal University. "When growth slows, the Xinxiang government keeps supporting traditional industries to preserve jobs," she said.

At the Wan Hui development, real-estate agents sold 200 apartments in a single day when it opened in 2009, said sales representative Wang Shuai. This year it has taken four months to sell 40 homes starting at 486,000 yuan [$76,400] for two bedrooms, he said.