Sun Lijian, vice-director of Fudan University’s school of economics in Shanghai, said that while lower labour costs were an argument for moving factories to Hebei, relocation was not the ultimate solution.

“If there’s a lack of demand for the goods produced in Hebei, then those plants will be wasted and the enterprises will give up on Hebei and leave,” he said.

The rise and fall of Caofeidian can be viewed as a case study of China’s disordered investment boom, when it boasted economic growth rates that were the envy of the world but which came with hidden risks. And its future, the successes and the setbacks, is likely to mirror the urbanisation process of the world’s second-largest economy.

A decade of reclamation has turned the island, in the north of Bohai Bay, from a speck of less than 5 sq km into a new port of nearly 2,000 sq km.

In 2005, when it was chosen as the new location for Beijing-based steel producer Shougang, the plan was for Caofeidian to develop four pillar industries: the port, steel, electricity and petrochemicals.

But the construction boom hit the wall in 2012 when the mainland’s overall economic growth started to lose steam and overcapacity in manufacturing sectors became increasingly problematic.

Many investors in Caofeidian dumped projects as funding broke down – economists estimate the bad loans involved amount to hundreds of billion of yuan – and the town became one of the mainland’s biggest half-finished “rotten-tail” projects.

However, it was not the only one and that helps explain concerns about the soaring debt pile that followed the mainland’s 4 trillion yuan (HK$4.75 trillion) stimulus package, designed to counter the effects of the 2007-2008 global financial crisis.

The International Monetary Fund estimates the mainland’s total debt burden equals 225 per cent of its gross domestic product, with the potential losses on mainland banks’ corporate loans equal to 7 per cent of GDP.

Unfinished buildings, mostly locked up and abandoned hotels and commercial blocks, are a common sight in Caofeidian, even in the centre of town.

But that does not mean construction work has come to a standstill.

Bridges and railway lines are now being built as part of a regional development plan covering Beijing, Tianjin and Hebei. Projects include a high-speed railway line connecting Beijing and Tangshan that could cut travel times between the two cities to just half an hour.

As part of the regional plan, Caofeidian is now focusing on logistics and the green economy.

Beijing wants to move more polluting industries from the capital to neighbouring Hebei and to set up big logistics centres and industrial zones in the province, including Caofeidian. The ultimate aim is to create a modern transport network, including roads, railways and a cluster of ports, while jointly addressing the region’s notorious air pollution.

With Beijing’s help, Caofeidian hopes to attract hi-tech companies and those involved in environmentally friendly activities. It has also built a university campus and is seeking to jointly set up senior middle schools with Beijing in the hope of boosting its population.

Ding Yongqiang, a senior official at Caofeidian’s China-Japan-South Korea Recycling Economic Zone said one of the major difficulties faced by the town was the lack of specific policies.

“Currently, slogans outweigh practical policies,” he said. “We are negotiating with targeted businesses to figure out what kind of specific and feasible policies we need.”

Ding said a relaxation of regulatory restrictions on financing would be one way to attract business.

“Hi-tech firms which use intellectual property as collateral can only borrow a maximum of 30 per cent of the valuation of their patents from banks,” he said. “That is too small. We have land, we have good tax policies, but if we cannot offer attractive financial conditions, it is hard to induce companies to settle here.”

Xu Fengxian, a researcher with the Chinese Academy of Social Sciences, said the effort to transform Caofeidian was still at an early stage due to its underdeveloped business environment and a small population.

“In addition to a good transport network, it is necessary for Caofeidian to play up its role as the port city for the area and to develop tourism,” Xu said.

There were 270,000 residents in Caofeidian as of July 2012, according to official data. It created 5,140 new urban jobs last year, little changed from the 5,100 created in 2013.

A woman in her sixties who was looking after her two-year-old granddaughter said she had first travelled to Caofeidian from Shanxi province in 2008, when her daughter moved there.

“I was very sad when I saw how underdeveloped it was,” she said. “I went back crying all the way.”

Meihe Lanwan, a compound of 15 apartment buildings that first went on sale four years ago is hoping to boost sluggish sales. But apart from a nearby residential compound for university teachers there is nothing else in the area – no kindergartens, supermarkets, hospitals or other public services. A four-lane road beside the compound remains unfinished and is slowly being overgrown by grass.

“There are now 30 to 40 households living here,” said Yan Li, one of two sales consultants. “More may come as university faculties will come here this autumn.”

A worker with Tangshan Sanyou, a chemical fibre producer in Caofeidian’s Nanpu economic development zone, said the development pie had grown too big, too fast.

“Unless the central government treats Caofeidian like it did Shenzhen decades ago, Hebei, by itself, is unable to boost Caofeidian,” he said. “It has no money and it also needs to develop Shijiazhuang [the provincial capital] and other cities.”

He also pointed out that Caofeidian was facing competition from Tianjin, a major port less than 50km away.

However, Ding, from the recycling zone, said the two ports could cooperate rather than compete.

“Caofeidian has two docks for 400,000-tonne cargos, which is more than Tianjin’s port can handle,” he said.

Another official, who declined to be named, said the local authorities should reduce intervention and give private and hi-tech companies more freedom to operate.

“The government should offer money to companies with very low interest rates, as long as the companies can create jobs and contribute taxes,” he said.

July 28 will mark the 40th anniversary of a devastating earthquake that struck Tangshan, killing up to 250,000 people. It is also the deadline for completion of an industrial park jointly developed by Beijing and Caofeidian.

Workers at the site said “important leaders” were expected to visit, some even mentioning President Xi Jinping, but no one knew what the factories would produce.

A Guangzhou-based economist said Beijing was like a “black hole”, absorbing massive amounts of resources and talent, which made it hard for government-led urbanisation efforts in surrounding areas to proceed smoothly.

Local governments in search of quick results found it difficult to resist the temptation to invest massive resources in a small area.

“If the government still controls a large proportion of financial resources, it will inevitably lead to ineffective investment,” he said. “With government endorsement, implicit or explicit, banks are willing to continue to lend to poorly designed projects.”

Ding said Caofeidian was changing every week, “but we want innovative policies”.

“Even if we fail, we will learn lessons,” he said.