From 2000 to 2005, Lishui's population went from 160,000 to 250,000, and the local government invested 8.8 billion dollars in infrastructure for the region it administers. During those five years, infrastructure investment was five times the amount spent in the previous half century. In money terms, what was once 50 days' work is now done in one.

For the past three decades, China's economy has averaged nearly 10 percent annual growth. The economy is fueled by the largest migration the world has ever seen: An estimated 140 million rural Chinese have already left their homes, and another 45 million are expected to join the urban workforce in the next five years.

Such cities must expand and attract industry on their own, because the central government no longer provides the funding and guidance of the old planned economy.

Chinese cities aren't allowed to raise funds through municipal bonds or sharp tax increases, so they turn to real estate. Legally, all land belongs to the nation, but local governments can approve the sale of land-use rights—the closest thing to private ownership. Cities acquire suburban land from peasants at artificially low set rates, approve it for development, and sell for a profit on the open market. Across China, an estimated 40 to 60 percent of local government revenue is acquired in this way.

Formerly, the 16.5 acres (6.7 hectares) had belonged to the village of Xiahe, but in 2000 the city government bought the land-use rights for one million dollars. Three years later, Lishui flipped the land to Yintai Real Estate for 37 million dollars. Given that corruption is endemic in Chinese real estate, the actual price may have been even higher.

In such an environment, everybody gambles on growth. Most of the city's massive investment in infrastructure had been borrowed from state-owned banks, which also loaned money to the developers—Yintai had borrowed over 28 million dollars for its Jiangbin venture. If the real estate market went cold, the whole system was in trouble. During the past five years, the average price of a Lishui apartment had risen sixfold.

Concerned about a slowdown of contracted foreign investment, the Shanghai municipal government has eased restrictions to lure foreigners to invest in property development again, in a reversal of an earlier policy aimed at cooling down the real-estate sector.

"Shanghai's property market also showed signs of cooling down in January-April, although housing prices in all other major Chinese cities continued to grow significantly. The average property price in Shanghai fell 3% in the first quarter, compared with a 9% increase in the same period last year."

This is an interesting development. I smell a bubble bursting, and they need the final sucker to bail out the speculators (everyone).

An indicator of the widespread speculation gripping the Shanghai exchange came last month with a Chinese government website reporting that one in 10 maids in the city, China's financial capital, had quit their jobs to take up trading full time.