XIONGAN, China--The Chinese economy is in a strange kind of limbo.
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Take Xiongan, a sleepy rural district south of Beijing that for one giddy moment became the country's hottest stretch of real estate.
Investors converged here after state media this spring proclaimed that President Xi Jinping had picked it as the location of a new supercity , twice the area of New York and "crucial for the millennium to come." But when prices tripled overnight, officials froze real-estate transactions rather than see Mr. Xi's model city turn into a speculators' playground.
Today, Xiongan is on hold: Cranes swing idly over the half-finished apartment blocks that dot the landscape, and the gates to newly completed luxury villa complexes are padlocked.
The same concocted calm pervades much of the world's second-largest economy.
In the run-up to next month's 19th Communist Party Congress, where Mr. Xi intends to cement his power for another five years, the government has laid its heavy hand on the country's markets. No turmoil can be allowed to spoil the political pageantry.
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Municipal governments in megacities like Shanghai and Beijing have managed to hold down runaway property prices with a web of restrictions on who can buy apartments.
In a recent echo of the Xiongan freeze, regulators have closed China's roaring exchanges for bitcoin, the cryptocurrency that has become another manifestation of the Chinese economy's susceptibility to bubbles.
To stanch a gush of money out of the country, authorities have hauled in for questioning prominent tycoons who have been buying up trophy assets overseas. Capital flight is now under control.
This imposed discipline looks to some foreign investors like an economic turnaround: The yuan has recouped much of last year's loss; Shanghai stocks are recovering broadly, led by "old-economy" state companies in steel, aluminum and manufacturing; and the Hong Kong-issued bonds of Chinese property conglomerates are red hot.
Just a few months ago, the almost universal belief among Western economists was that the yuan was on a slow grind lower. Many thought that real-estate markets, fed by a mortgage boom, were dangerously frothy and saw state-owned corporate behemoths as drags on the economy, rather than growth drivers.
Now, all these discordant notes seem to have come together in a soothing symphony.
But what, fundamentally, has changed? Mr. Xi has done little in his first term to address the root causes of the economy's imbalances: Growth is still juiced by easy credit despite a mountain of debt. Rather than trim the bloat in state enterprises, the president is bulking them up.
True, global trade has picked up sharply, lifting Chinese exports and boosting industrial profits. And Donald Trump's stalled economic agenda has weighed on the dollar, thereby helping boost the yuan.
Mostly, however, we're witnessing the awesome power of the party to orchestrate the economy, by finesse if possible and diktat when necessary.
Those who think the economy has turned a corner should consider what might happen if the authorities let the yuan find its own level, or allowed capital to leave the country freely or got serious about reducing debt: almost certainly a run on the currency and a severe jolt to growth.
For optimists, bullish market valuations are justified by expectations that Mr. Xi will leverage his new strength after the congress to overhaul the economy.
Xiongan will be a test. Mr. Xi imagines it as a model for a new kind of urbanization--green, super-high-tech, innovative and socially inclusive, focused on generating real jobs and incomes for the middle classes, not windfalls for speculators and corrupt officials.
But the outskirts of China's megacities are littered with failed utopias where previous visions have run into reality.
A decade ago, Shanghai sought to unclog the city center and pioneer sustainable lifestyles by building a series of European-themed satellites. Architectural follies, they never took off. Thames Town, a replica of "Ye Olde England" complete with a pub, church spire, cobblestone streets and statue of Winston Churchill, is used as a backdrop for wedding photos.
Another Shanghai scheme, to create a green metropolis on the world's largest alluvial island--the British engineering firm Arup called it "the quest to create a new world"--died on the drawing boards.
A short drive from Xiongan on the Bohai Bay, an "international ecocity"--a pet project of Mr. Xi's predecessor, Hu Jintao--was meant to have a monorail and harvest almost all its energy from the wind and sun. It's now a debt-ridden ghost town.
Xiongan has gotten off to the worst possible start, with a speculative frenzy.
For Beijing, however, it's easier to smother this kind of activity than deal with the fundamental causes. An all-powerful leadership can likely keep the forces of disruption at bay for some time. But they haven't disappeared; like Xiongan speculators, they're just lurking.
Write to Andrew Browne at email@example.com
(END) Dow Jones Newswires
September 12, 2017 07:59 ET (11:59 GMT)