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Well one thing to consider is the structure of the demand vs supply. It's one thing to say there's a demand for housing, but it's another to say there is a demand for "luxury" housing (by Chinese standards) which is being built, if the people who do not yet own such property simply do not and can never hope to make enough money to afford it.

Another thing to worry about is that even a 20-30% fall will see a lot of the middle/upper middle class people lose very significant amounts of money (and going by interviews I have seen with them, these people are not at all aware of the fact that RE can actually go down in value), which is not good considering internal consumption for consumer goods is already very low in China. This will cause the aspiring middle class to consume even less in the economy - at a time when the Chinese central government is frantically trying to boost internal consumption.

I fail to see how, all my analysis are reasonably sound. I hold no investments which are either long or short on China.

I agree. And my point is that the more the government interferes with the markets, the worse the economy of that country will end up. I also agree that there are economic problems virtually everywhere (but not entirely) in the developed world, however it is because they do exist, and because China is ill-prepared and ill-suited to deal with them, that I think they will be hit particularly hard. Instead of implementing strong reforms to make their economy more market driven, they have relied ever more on a construction bubble to keep the magical gdp growth figures flowing. To me this just reeks of corruption and incompetence.

Well once again, I don't disagree with any of that. It seems we are both in agreement that there will be some sort of a crash, the difference in views being on the size and/or end result.

I cannot begin to predict what will happen afterwards or the scale of it. It is very hard to tell. I think it will depend on China's role in the new economy after the recession/depression we may well face. At the end of the day, they have 2 things to keep growth going;

1. Production capacity

2. Foreign exchange reserves

Now (1) will only be good if there will be some semblence of demand, and if the developed countries choose not to move to protectionist policies that would negatively impact China's exports.

And (2) will only be good if the developed countries' who's debt China now holds choose not to inflate away their debt problems.

Granted, both of these sound somewhat drastic, but these are desperate times we are living in.