Chinese cities are less densely populated than many people think:
While China is a very populous country, density in Chinese cities is typically much lower than major American metropolitan areas. For example, the first tier cities have population density varying from 1,000 to 2,000 people per square kilometer in 2010, whereas New York City has density of 10,000 people per square kilometer and the top 100 American MSAs all have density above 4,000 people per square kilometer.
That is from Glaeser, Huang, Ma, and Shleifer “A Real Estate Boom With Chinese Characteristics,” an interesting and useful paper. They argue that current Chinese real estate prices might prove sustainable, but there is a basic dilemma that cannot be avoided:
…that path may create significant social costs. Construction employment would plummet. Millions of Chinese may lose the apparent productivity advantages associated with living in Chinese cities (Chauvin et al. 2016). Local governments would lose the financial autonomy from land sales and taxes that has been their institutional basis. The alternative for the Chinese government is to accommodate high levels of construction and housing supply. As we showed, this will lead to very low or negative expected returns to investment in housing. The welfare of potential new buyers will rise, but current owners will suffer losses.