China has seen some pretty dramatic bubbles in recent years, many of which have yet to pop, such as real estate.
The Chinese stock market bubble that peaked and crashed last summer comes to mind.

However, the craziness has only gotten more and more extreme. This time it was the commodities market that went bonkers.

From the Dutch tulip craze of 1637 to America’s dot-com bubble at the turn of the century, history is littered with speculative frenzies that ended badly for investors.
But rarely has a mania escalated so rapidly, and spurred such fevered trading, as the great China commodities boom of 2016. Over the span of just two wild months, daily turnover on the nation’s futures markets has jumped by the equivalent of $183 billion, outpacing the headiest days of last year’s Chinese stock bubble and making volumes on the Nasdaq exchange in 2000 look tame.
What started as a logical bet -- that China’s economic stimulus and industrial reforms would lead to shortages of construction materials -- quickly morphed into a full-blown commodities frenzy with little bearing on reality. As the nation’s army of individual investors piled in, they traded enough cotton in a single day last month to make one pair of jeans for everyone on Earth and shuffled around enough soybeans for 56 billion servings of tofu.

"I’m pretty bored at work, so I trade commodities futures for some excitement."
- Jeremy He

Chinese authorities cracked down and commodities trading collapsed as quickly as it had started, but that's hardly comforting because it doesn't address the underlying problem - too much easy credit.

“You have far too much credit, money sloshing about, money looking for higher returns,” said Fraser Howie, the co-author of “Red Capitalism: The Fragile Financial Foundation of China’s Extraordinary Rise.” “Even in commodities where you could have argued there is some reason for prices to rise, that gets quickly swamped by a nascent bull market and becomes an uncontrollable bubble.”
In many ways, China’s financial landscape was ripe for another mania. New credit soared to a record in the first quarter, giving individuals and businesses plenty of cash to invest at a time when several of the country’s traditional sources of return looked unattractive.

Some of you might ask, so why does this matter? To answer that question, I would like to refer to yesterday's market action.

The Hang Seng China Enterprises Index tracking some of the nation’s biggest companies tumbled from an advance of 1 percent to a loss of 1.5 percent in about two minutes, before rebounding to a gain.

Flash crashes are not healthy. They tend to scare long-term investors away, while keeping speculators around.

Credit is just another word for debt, and people are waking up to the fact that there is far too much debt in China.

According to the Economist magazine, China's total debt has gone from 155 percent the size of its economy in 2008 to 260 percent by the end of 2015. And that, in turn, has created three big problems. The first is that most of this money has poured into just a few sectors of the economy — in particular, steel, cement and housing. The result has been a glut that has pushed down prices so much that companies can't afford to sell at them. But they can't afford not to either, because they need some money coming in to at least pay the interest on what they owe.
In a normal economy, the word for this kind of situation would be "bankruptcy." But China is far from being a normal economy. The government still controls a lot of banks and companies, so it can tell them when to lend, when to borrow, and when to restructure or roll over debt all in the name of social stability rather than making money...
That brings us to problem No. 2. It's hard to lend out so much money so fast without a lot of it going to people who won't be able to pay you back. In China's case, the consultancy Oxford Economics thinks this could add up to nonperforming loans equal to 14 percent of gross domestic product...
The biggest problem, though, is that Beijing hasn't done anything about this. Well, other than make it worse.

The Chinese economy is slowing down, and slowing down fast. Bad debt can be grown out of at 10% growth, but maybe not at 5%.
It's a Ponzi scenario, where the investment scheme blows up when the number of new investors begin to fall off.
What's more, almost everyone knows that this game is coming to an end. Which is why the Chinese are looking to get their paper profits out of China and into real investments in any way they can.
One of their favorite ways is American real estate.

Chinese nationals have become the largest foreign buyers of US property after pouring billions into the market in search of safe offshore assets, according to a study.
A huge surge in Chinese buying of both residential and commercial real estate last year took their five-year investment total to more than $110bn, according to the study from the Asia Society and Rosen Consulting Group.
Chinese investment in property has also helped to inflate prices in other developed countries, notably the UK and Australia in the wake of the dip in world stock markets in 2015

What this is translating into is a surplus of empty residential housing, in expensive coastal cities, being used as investments all over the world.