The local governments like the bubble, because they get revenue from land sales, and probably get bribed by developers for approving new construction. The local government companies and departments also own (or control) a lot of land, and get to exploit that in various ways.

The central government (or the central party committee, who outrank both the government and the military - which does not report to the government) worries about the economy as a whole, and the stability of society. The buck stops with them. They care about the housing bubble, but with dozens of provinces, hundreds of cities, and third world government accountability (lots of stuff is done on paper, because no-one wants to be accountable) there's not much they can really do in a hurry.

http://www.businessinsider.com/china-ghost-cities-2011-11

http://www.theatlantic.com/business/archive/2011/06/why-chin...

http://www.time.com/time/photogallery/0,29307,1975397,00.htm...

Can someone knowledgable in such matters explain to me why this does not indicate the chinese economy is headed inexorably towards a massive crash, especially considering the huge amount of fraud which we all know occurs there? Is it just to do with the amount of central planning and control they have?

(Also, which of the many and varied financial gambling instruments available in this modern world should I use to best profit from this contingency?)

Not true, people want to live there, most just can't afford it. In fact in some of these towns most of the units have been sold -- just not sold to people who live there.

"Can someone explain why this does not indicate the Chinese economy is headed inexorably towards a massive crash"

Probably in the same way that no one going to see Adventures of Pluto Nash didn't cause a massive crash in the US economy or even in the film industry here. I'll elaborate...

What percent of the Chinese economy is real estate? 6%?

What % of Chinese real estate do these ghost towns represent? 1%? 5%? 10%?

Are there 20 success stories (boom towns) for every ghost town? 5? 10? 100? None?

Ghost towns maybe a real and dangerous symptom of a coming Chinese crash. Or not. It's really hard to jump from "giant examples of waste" to "the economy is going to crash".

There are certainly other indicators that housing is a huge bubble in parts of China. There's also the inexorable and unbelievable growth that China has experienced over the last few decades. Growth like that has a tendency to make lots of things look like bubbles that aren't.

The difficulties that western economies are having would seem a much greater threat to China's economy than this.

Thanks for the explanation. Same goes to the other replies.

I wouldn't be too quick to call a crash. Large cities become self-sustaining after a point. Except for Detroit (where the 'city' was mostly divested of wealth in favour of surrounding suburbs), there are few examples of modern cities failing without something catastrophic causing it.

Ignoring scam developments, because they happen everywhere, there isn't much chance of a crash unless everyone rich leaves China. Look at places of very significant development, like Chongqing, has a population of 20 million and housing for about 30 million at the moment. It's marked as one of the four 'direct-controlled municipalities' and it's likely to grow further because there are few other places for young educated people to move to out of the rural areas of Southern and Central China.

This isn't a defence of China, I'm no fan, but there are realities that must be considered. Urbanization is a real process, people will move from the country to the city seeking wealth. When you start with a huge rural base, like India and China, the urbanization process will send property markets berserk.

Don't really want to get into a Good US - Bad China debate, but I wanted to point out bad use of stats you engaged in with this statement. It struck me because I am currently in Houston dealing with bad use of stats in the energy industry. Which flawed stats are being used as an argument against certain forms of energy.

Anyway... China's bullet trains have carried millions of passengers. As have HSR all around the globe. In that time, there was one crash in China, killing 40 people. The first, [as you were] the SECOND deadliest, HSR collision incident globally since Eschede-1998. That's actually a pretty good track record.

Again, I can tell you are pretty emotional about the China thing so I am not commenting on that... just saying that the HSR is actually pretty impressive when viewed from a dispassionate frame of reference.

It's not hard to lay tens of thousands of miles of shoddy track and run screaming locomotives down them. It's another game altogether to painstakingly design this system to be fault-tolerant and accept a wide range of failure modes.

The issue isn't that 35 people were killed out of millions transported, it's that the system seemingly had no account for a failure mode as simple as "train ahead loses power".

Getting something 95% safe is pretty cheap. Getting something 99.99% safe is monumentally expensive, and that really characterizes infrastructure development between the developed and developing world.

To circle back to the original point: OP is saying that China's HSR infrastructure was seen as an example to the world, creating controversy about the efficiency and cost of infrastructure in the developed world. That is, until you account for the fact that this infrastructure simply isn't built to the same standard as it is in the developed world.

Granted, it gives an internet-centric view of things, which doesn't do justice to all the disconnected rural parts of China, but at least it's a bit more real than what you get most other places.