Urbanisation, which has seen hundreds of millions of Chinese flock to cities and towns, has been a key factor underlying China’s economic boom and is still seen by Beijing as a growth driver the country can rely upon for years or even decades to come.

But the parents’ efforts to secure an urban future for their second son suffered an unexpected setback: the developer of Billionaire’s Lakeview Garden, a literal translation of the project’s Chinese name, ran out of cash and construction ground to a halt.

That shattered their 24-year-old son’s dream and led to the postponement of his wedding because in Yuncheng, as in many other places in China, a new apartment is generally viewed as an indispensable precondition for matrimony.

“I called the mayor’s hotline and went to the municipal petition office, but no one could help,” he said, asking to be referred to as Liu Yang, not his real name, in order to hide his identity.

A tall, thin young man, he recently quit his job in a cinema in the city.

He dropped out of the education system after junior middle school – not unusual for boys in rural areas – before finding work as a hotel clerk in Beijing. After a narrow escape from a gang promoting a Ponzi scheme in Qingdao, he returned home to Yuncheng three years ago.

“If I can’t get a home, there will be no marriage for me,” he said. “If you ask me what I am feeling now, I can only tell you that I am very desperate.”

He’s now living with his fiancée in a rented apartment in town but her parents have made it clear they expect him to buy a home before they will allow him to marry their daughter.

His parents previously bought his elder brother a home, for the same reason.

The family and 100 other buyers who put down money for apartments in the project are now desperately trying to get refunds or promises the homes will be delivered.

The developer of the property, Hu Haigang, said he was forced to suspend construction because he ran out of cash due to the “collapse of a usurious loan” from the shadow banking sector.

“I have put all my money into the property projects,” he said. “They are in very good locations. I understand the anxiety of buyers, but I am more worried than them.

“I am looking for ways to get 50 million yuan to cover the funding gap, and hope to finish the necessary procedures to resume construction in two months.”

Hu, who used to own a metal processing business, had no experience in property development when he set up Yi Ang Real Estate in 2011 in search of quick profits. Coal-rich Shanxi province was flooded with cash back then, with coal prices at an all-time high – more than 50 per cent above the current price even after a big rebound this year.

But Hu had to turn to loan sharks charging high interest rates for funds because bank lending to property developers was restricted by government policies. The cash dried up when the local economy cooled due to a plunge in coal prices and the side effects of a provincial corruption scandal.

“Hu’s situation is typical for third- and fourth-tier cities,” said Yan Yuejin, research director of the E-House China R&D Institute. “At the end of the day, it may take local government intervention to prevent such problems from becoming social issues.”

While China’s top cities, such as Beijing and Shanghai, and many coastal ones are witnessing rapidly rising home prices, the housing market in Yuncheng is stagnant. Even Shanxi’s provincial capital, Taiyuan, which has a stronger property market than Yuncheng, saw residential property prices rise only 2.1 per cent year on year in August.

Unfinished and unsold property projects in third- and fourth-tier cities remain a headache for Beijing and reducing housing market inventory is a top policy priority this year. Many local governments are trying to encourage people with rural household registration, like Liu, to buy urban properties.

Allowing people to settle down in local towns is a key part of the new urbanisation plan envisioned by Premier Li Keqiang to help transform the Chinese economy from one reliant on wasteful and polluting manufacturing to one more focused on consumption and innovation.

Instead of attracting too many people to China’s megacities, Beijing is trying to create a new middle class in local towns and cities like Yuncheng, which are surrounded by rural villages, and hopes to raise the country’s urbanisation ratio from the current 53 per cent to 60 per cent by 2020.

Beijing once described the process as the “three 100-million-people tasks”, namely making 100 million rural residents urban dwellers, relocating 100 million people from old and shabby “shanty towns” into modern homes, and creating jobs for 100 million workers in cities near their home towns.

But there are growing signs of a deep mismatch between what is happening on the ground and the central government’s intentions. Beijing wants to “urbanise” rural residents locally, in towns near their rural roots, but the economies of inland provinces are often too weak to generate sufficient jobs and services for new urban residents.

The urbanisation drive is already losing momentum. China has reportedly built enough housing in new town areas to accommodate 3.4 billion people – 2 billion more than the country’s population – with oversupply especially serious in smaller cities and towns where economic growth is weak and demand is sluggish.

A report on urbanisation published by the National Development and Reform Commission in April said that less than 10 per cent of migrant workers moved to small towns.

“They are obviously falling far behind this schedule so the reduction of property inventories in smaller cities seems likely to be a long slog,” said Nicholas Lardy, a senior fellow with the Peterson Institute for International Economics.

The State Council urged local governments this month to give permanent urban residency to those who have purchased homes in towns or who have stable jobs, but whether that will attract more rural residents to urban areas remains to be seen.

Some people are calling for a rethink of China’s urbanisation plan, arguing that it is a futile attempt to resist the tide of people and money wanting to move to bigger cities. Beijing’s past efforts to shower money and preferential policy treatment on western regions did little to narrow the development gap with rich coastal zones, and the government’s plan to revitalise its rust-belt northeastern region has proved similarly fruitless, with Liaoning province reporting economic contraction in the first half of this year.

The real picture of China’s urbanisation will be shaped by the choices and experiences of young people like Ya Jie, instead of grand government plans.

Ya, an art designer for an online game studio in Beijing, said she would rather live there than in her hometown of Yuncheng, at least for now, because her skills would not be in demand back home.

However, it’s also extremely hard for people like Ya to settle down in megacities like Beijing, with household registration restrictions and skyrocketing house prices making them an unwelcoming environment for new residents.

Two years after graduation, Ya has to work 12 hours a day and six days a week to earn a salary that is barely enough to cover her living expenses.

“I can’t save money, and the work is hard,” she said. “I want to go back home in a few years. I could live close to my parents and life will be much easier.”

However, Ya said she had no idea what jobs would be available for her back in Yuncheng.

Xu Fengxian, an economist with the Chinese Academy of Social Sciences, said urbanisation had moved more slowly than expected in small cities, despite high hopes from Beijing, and inland provinces, in particular, were lagging behind.

“Maybe they can learn from experiences in richer provinces like Zhejiang, Jiangsu and Guangdong to develop the local economy and improve transport links with big cities nearby,” Xu said.

On a recent visit to Yuncheng, the unfinished steel and cement skeletons of “rotten-tail” projects were not hard to spot, even in the city centre.

The five rusting, high-rise blocks on the dusty site of Billionaire’s Lakeview Garden were empty, apart from a few ground-floor rooms that workers were using as temporary shelter.

Five workers were dismantling steel scaffolding and loading it onto a small truck to be taken away.

The owner of the scaffolding said: “Why would I leave those materials here? The developer owes me several million yuan, and I am taking everything away from here.”