Capital seeks sanctuary. In China’s property sector, however, that quest for safety had inadvertently erected a cage. The recent government takeover of Wuhan-based private lender Zhongbang Bank, expected to see a dilution of its private capital amid serious credit risks, is a calculated regulatory action. It echoes a larger and darker precedent. A few years ago, another commercial lender, Shengjing Bank, became caught up in the Evergrande debt crisis. There was speculation property developer...