What evidence do you need of a Chinese real estate bubble?

If there is not a bubble in Chinese real estate, where is there a better example? We have all of the conditions necessary for a bubble. Excessive credit. Lax regulation and lending standards for banks and the real estate market. (Yes, you can have lax regulation in a command economy.) Strong price increases which can lead to a positive feedback loop. Real estate collateral used to back further loans.

The Chinese government sees it, the market sees it, but the issue is how can this bubble be stopped. Cutting credit is one solution. We are seeing reserve requirements go up, but credit restrictions are blunt instrument for sector bubbles. Also, if the bubble is pricked too quickly, the feedback loop will work in reverse which will led to a collapse in the economy. Allowing for more flexible exchange rates may seem like a solution to cut the monetary link with the US, but this will affect the export growth engine. If the adjustment is not large enough, there will be further fuel for speculation in China from foreign sources.

This is a problem that will end badly. We have seen this real estate problem before, the US, Ireland, the Scandis, UK, Spain, and Japan to name a few.