Kai Ryssdal: So here's a telling story about China, I think. One night while we were in Shanghai, we took a cab out to the suburbs to meet 24-year-old Randy Tian.
Randy Tian: Hello, this is my home. Welcome to it.
He said home; you should think apartment -- a small one, crowded with five people in it. But it's his, and one can reasonably ask why a 24-year-old single guy needs to own his own place in one of the most expensive cities in the world. So we did.
Tian: The most important thing is that getting married, if you have your own apartment, this here in China is traditional.
If you don't have your own apartment, he said, you can't marry.
We double checked that cultural milepost with financial analyst Jay Weng.
Jay Weng: Young people are buying houses not because they like to buy houses but because they are forced by Chinese culture.
Jay was educated in the U.S., professionally trained on Wall Street, so he knows a little something about bubbles. Now he's back in Shanghai watching it happen all over again in slow motion.
Weng: There was a real estate bubble in the United States, there was a real estate bubble in Europe, there was a real estate bubble in Japan, in Hong Kong, everywhere. China has not experienced a real estate bubble -- yet. It's unavoidable, right? And I believe it's going to hit China particularly hard.
That may be the case, but you're going to have a tough time convincing Randy Tian. Not only does he own the place he lives in -- the marriage apartment, I guess you could call it -- he just bought another one. Not worried, though, about a real estate crash.
Tian: I think it's impossible in Shanghai. Impossible, I think.
Impossible, he said, for there to be a crash.
Ryssdal: Have you heard about the housing crash in the U.S.?
Tian: Yeah, I know that.
Ryssdal: Everybody said the same thing about real estate in America, it could never go down. It's impossible.
Here's what happens, though, when there's housing demand fed by an attitude like that: Developers build. They build a lot. Throw in the mass urbanization here, millions of people moving from the country to the cities, and there's almost no way to build enough housing until you build too much.
Our Shanghai correspondent Rob Schmitz reports.
Rob Schmitz: It seemed like a good idea at the time. It was 2006, Shanghai. New, luxurious housing developments were going up all over the place; each trying to outdo the other. One particularly bold developer said "top this," a suburb way out on the edge of Shanghai that recreates a quaint village in old England. It's got narrow cobblestone streets, a Gothic cathedral, red telephone booths, and a man-made river -- the Thames. This is Thamestown. These days it might as well be called "Ghost town." The only people I find are two workers replacing some cobblestones. I ask them if there's anyone else here. They direct me to Thamestown's rather un-bustling business district. The only place open is a cafe. It's next door to a closed pub and a boarded up fish-and-chip shop.
Hong Fang owns this place.
Hong Fang: My friends warned me that starting a business here would be risky: How can you make money if nobody lives here, they said. They were right. I lost money in the first two years. Last year, I came close to breaking even. But it looks like I'm not going to make money again this year.
Five years ago, Hong and her husband bought one of the 1,600 homes in Thamestown. Since then they've watched as speculators bought up property around them and then sat on their investments. They didn't even rent them out.
Tsinghua University's Patrick Chovanec says Thamestown is a colorful example of something more serious.
Patrick Chovanec: For many years now we've seen a pattern where people in China pour money into real estate -- and often unproductive real estate -- as a place to stash their cash.
The problem is investors have driven up property prices to unrealistic levels. Sound familiar? Chovanec says in China's case, it goes beyond being just a real estate bubble. Seventy percent of China's economic growth comes from building things: housing developments, high-speed train lines, things like that. This is all funded through loans from state banks -- banks that, in recent years, have been ordered by China's government to keep on lending.
Chovanec: It's a very seductive idea that all you have to do is simply tell banks just go forth and lend, and you count the amount they've lended and the amount that's poured out as GDP, and then there's your growth. And of course, in the short term, that's fantastic. But it's not a healthy economy. That's an economy on steroids.
Even China's national auditor says many local governments are now having a problem paying back their loans. An economist with Credit Suisse called the problem China's biggest time bomb. And some believe for places like Thamestown, the bomb has already gone off.
On the empty streets, a photographer aims his camera at a couple dressed in a tux and a wedding gown. Thamestown is now one of the most popular spots in Shanghai for wedding photographs. The photographer is Aaron Huang.
Aaron Huang: I take wedding photos here every day. So does everyone else. It's the perfect place -- it's empty and it looks exactly like a European town.
And back at her cafe, Hong Fang may not have any customers, but she says loves waking up to nothing but the sound of birds singing. It's the peace and quiet of living in a developer's dream of China's limitless potential. A dream some say China may soon wake up from.
In Thamestown, I'm Rob Schmitz for Marketplace.