For many years, individual investors in China were using homes as highly leveraged investments. They borrowed money to buy them and owned portfolios of them like others own portfolios of stocks. Often these apartments were unfinished inside, vacant, and overpriced, but it didn’t matter because Chinese investors knew – just like their American counterparts – that you can’t lose money in real estate.

Now these investments are curdling.

The moneyed folks in China also like gambling in Macau, where they could get around their government’s strict capital controls and launder some money while at it. But that system is now under scrutiny. The Chinese VIPs are under fire. So they are staying away in droves. Gambling revenues in Macau are in free fall, after years of phenomenal growth [read… Macau Bleeds, Warns About Chinese Economy].

So what’s next? In the run-up to the Beijing Olympics, individual investors plowed their money into stocks, and stocks soared, and everyone who dabbled in it became rich. But then it all collapsed spectacularly and languished for years.

Now the individual investors are back in stocks with a vengeance. But this time it’s different. Now they’re supported by foreign investors. In the past, only some carefully selected foreign institutional investors had access to shares of companies listed on the Shanghai Stock exchange. But everything changed in November when the doors opened widely to foreign investors.

And the party began in earnest. On Monday, the Shanghai-A-share index closed at 3,687, up 85% since May 2014, the ninth session in a row of gains. As of Tuesday morning, Shanghai is down 1.3%. You can’t win every day.

Should regulators be concerned? Should they throw a Greenspan-ian phrase, like “irrational exuberance,” at the market to give speculators pause, not that it helped much last time?

On the contrary. Laura He at MarketWatch explained that the jump in share prices on Monday “came after a spokesman for the China Securities Regulatory Commission said Friday that the recent gains for Shanghai-listed shares had its own ‘inevitability and rationality.’”

“Inevitability and rationality” is the rhetorical opposite of “irrational exuberance” that Fed Chairman Alan Greenspan used in 1996 to describe the dot-com stock market bubble, an egregious comment for which he came under withering fire. And stocks, after a brief swoon, continued to inflate beyond even irrational exuberance.

In China, the property sector, which had been a substantial driver of the economy, is in serious trouble. The mountain of visible and concealed debt, left over from the economic surge of the past, is beginning to decompose. And the outlook of the overall economy, plagued by weakness in manufacturing and industrial overcapacity after years of malinvestment, is getting foggier.

But the CSRC spokesman gave a reason why skyrocketing stocks were inevitable and rational: China’s improving economic conditions!

And this wasn’t a wayward official in a drunken moment talking to no one in particular. Nor was it a gaff at an unguarded moment caught by an accidently live mic. But it was the spokesman for the CSRC, speaking for the CSRC. This was an official statement by the Chinese government that Chinese stocks, after having skyrocketed 85% in 10 months, in an economy that is getting mired down in issues, are a great deal. So buy, buy, buy, the Chinese government sez.

China has long frustrated the hard-landing watchers. But maybe not much longer. Read… Housing Crash in China Steeper than in Pre-Lehman America

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