Thanks to relatively low taxes and a strong cultural bias towards saving, large amounts of money has gone into Chinese property, nearly all from domestic investors.  Chinese savers have very few choices: they can put their money in state-owned banks, and receive near zero interest rates, or in shares traded in Shanghai or Shenzhen, or in real estate. Of these real estate is by far the most popular because of a widespread distrust of shares and the brokers who trade them.

The Chinese Government does not encourage foreign investors to invest in real estate, preferring them to put money into industry. Whatever nominal promises China made as part of its application to join the World Trade Organisation in 2001, in practice it still restricts foreign investment in real estate. It is not yet convinced of the benefits of a completely free market, for property at least.  The Yuan is not freely convertible, and investing in China is more of hassle than it is in most other parts of the world. But it is clear that China will never go back, and that in time further opening up of the market will occur and the huge price differentials between Hong Kong, for example, and the rest of China will gradually disappear.