China’s economy is at risk of its long-feared “hard landing”—a rapid slowdown in growth that would hit employment hard and could trigger big problems in global debt and currency markets.

The reason isn’t, as the Trump administration would like to believe, the U.S.’s trade offensive. Instead, Beijing has overdone its own crackdown on nonbank “shadow finance”—without opening alternative channels for private-sector borrowers, who often struggle to obtain bank credit. As a result, Chinese credit growth has continued to decelerate,...