HONG KONG — Wang Shidong and his two partners were still finishing graduate school two years ago when they raised $45 million in less than two months to start a venture capital fund. His wife, an elementary school teacher in their home village, was “terrified” that he got to manage so much money, Mr. Wang said. Things are different this year. After three months and visits with more than 90 potential investors all over China, Mr. Wang and his partners raised only $3 million for a second fund. In June they shut down the firm. Their fund, East Zhang Hangzhou Investment Management Ltd., was 1 of nearly 10,000 founded over the past three years amid a technology gold rush powered in part by China’s government-guided economic growth engine. Now they have become the latest sign that China’s engine is slowing down.

Many Chinese still believe their central government has the capacity to keep the economy from sliding into a recession, just as it did during the Asian financial crisis in 1997 and the Great Recession in 2008. Tomohiro Ohsumi | Bloomberg | Getty Images

“All industries, institutions and individuals are running short of cash,” said Zhang Kaixing, founder and chief executive of an online asset management company in Shenzhen called Jinfuzi, which means “golden ax.” Jinfuzi, which manages over $4.5 billion in assets, is the type of investor that technology funds court. “Many investors in private equity and venture capital funds want to take their money back,” Mr. Zhang said. Venture capital is a small part of the Chinese economy, which by most accounts is still growing at a quick pace compared with that of many other countries. But the industry’s fundraising problems may be a symptom of a widening malaise. After many years of easy credit and go-go growth, China is struggling with weakened investment and household consumption and increasing corporate and local government defaults. It could present Xi Jinping with his most difficult problem since he became the country’s top leader in 2013. Will China’s 40 years of continuous economic expansion stop under his rule? If so, how will 1.4 billion Chinese react when they realize that the country’s upward trajectory is coming to an end? More from The New York Times: Why Made in China 2025 Will Succeed, Despite Trump ZTE's Near-Collapse May Be China's Sputnik Moment China's Strong Economic Growth Figures Belie Signs of Weakness Many Chinese still believe that the central government has the capacity to keep the economy from sliding into a recession, just as it did during the Asian financial crisis in 1997 and the Great Recession in 2008. Beijing controls the banks, land, foreign exchange rates and the media, so it can mobilize and manipulate them when necessary. “In China we believe in Keynesian economics,” said Mr. Zhang, the Jinfuzi chief executive, referring to the economic theory that favors a bigger role for government. “If what’s going on in China were happening in the U.S., it would have been called a recession. But in China, the government will step in to interfere in significant ways.” Under President Xi, even economics has become a delicate topic. Many people in China are not willing to speak publicly because even economists aren’t allowed to make downward forecasts.

China's weakened investment and increasing corporate and local government defaults may be President Xi Jinping's most difficult issue since he became the country’s top leader in 2013. Getty Images

Yet in private conversations, investors, entrepreneurs and economists admit that with the high debt level and a trade war with the United States, the room for government maneuvering is shrinking. The degrees of pessimism vary, but many of them are bracing for a tough ride ahead. They told me to change all my savings into gold, a risk-management measure for extreme times. They worry that the trade war will hurt the tech and the venture capital industries because they operate globally. They even envision the possibility of the world’s going back to the Iron Curtain era, the pre-1989 world order of distinct political, economic and ideological barriers between the Soviet bloc and the West. Wu Xiaoling, a former deputy central bank governor and now dean of Tsinghua University PBC School of Finance, told the graduates last week to brace for global economic and political uncertainty. “We don’t have much time left to revel in the carnival of bubbles,” she said in a speech. “Every country, every individual should be prepared to face the reality after the tide retreats.” The speech was circulated widely on the Chinese social media, possibly because she said what’s on many people’s minds. China’s venture capital industry may be a sign of what’s to come. It is sensitive to both money flows and capital sentiment, and therefore could offer a good gauge of the health of key parts of the Chinese economy. The Chinese government on Monday reported that the economy grew 6.7 percent in the second quarter from a year ago.

All industries, institutions and individuals are running short of cash. Many investors in private equity and venture capital funds want to take their money back. Zhang Kaixing founder and CEO of Jinfuzi, an online asset management company in Shenzhen

So far, funding this year is weak. In the first three months, private equity and venture capital funds raised less than two-thirds of what they had raised over the same period a year ago, according to Zero2IPO Research in Beijing. Their investing activity dropped by nearly half. Funding has slowed in the past when the economy hit bumps, but both the data and the people involved say the current slowdown is unprecedented. Venture funds like East Zhang came into existence in part because, starting in 2014, Beijing made innovation and entrepreneurship top priorities. Leaders hoped that start-ups would help elevate China from a manufacturing power to a technology power. Corporations, banks and wealthy individuals fought to give money to venture funds to invest in start-ups. “We ended up with a lot of dumb money, managed by inexperienced investors,” said Ran Wang, chief executive of the investment bank CEC Capital Group in Beijing. Wang Shidong of East Zhang said his firm raised funds in 2016 without having to answer tough questions. They decided to set it up in the eastern city of Hangzhou, which — to attract funds like Mr. Wang’s — provides streamlined business registration, tax cuts and below-market office rents, as many other Chinese cities do. They invested in 17 projects in e-commerce, internet, biotech and agriculture. Only one of them is doing well. The rest either have failed or are barely surviving, Mr. Zhang said. The funding climate changed completely this year, he said. “Investors started paying attention to our numbers.” It’s not just newbie firms like East Zhang that are having a hard time finding investors. Funding is getting hard to come by for almost every venture capital firm. Under pressure from the government to improve their finances, banks pulled away from risky investments. This year’s ailing Chinese stock market has cost companies and wealthy investors alike a great deal of money. The government has cracked down on the risky and informal sources of money within China that provided a lot of venture capital funding.

An investor watches stock price movements at a securities company in Beijing. Greg Baker | AFP | Getty Images