YIZHENG, China—Until last year the Yangzhou Guoyu Shipbuilding Co. was a bustling village of 6,000 workers striving to fulfill world-wide orders for new ships.

Today, in a scene repeated across China’s industrial heartlands, the yard stands silent but for the howling of stray dogs around its deserted docks. Outside the closed gates is a ghost town of abandoned workers’ dormitories, closed restaurants and crumbling internet cafes.

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