The real estate 'bubble' (quotes because in conventional usage, often suggestion of a bubble implies that it will pop, and if it doesn't, it is not really a 'bubble') seems to be a result of supply and demand factors, largely.
It's a marriage of convenience.
The government didn't want a open market for the people. They also had massive infrastructure needs when this started. So it seemed like a marriage made in heaven.
But now they need to transition into being a mature economy, and they are having trouble doing that, partly because of the real estate bubble. They set it up as a safe way for people to invest. So if they let the bubble burst, the investments of hundreds of millions will take a massive hit. They really don't want that. So they pump endless billions into propping up the illusion that there is real investments to be made in real estate.
As the American West is about to find out, without enough water, you are screwed. China doesn't have enough water. They could easily buy time by charging people more for water. But that would also be politically unsettling. Even worse, they seem to be having trouble facing the crisis (just as we are). They need to be building on a massive scale, but what they actually need to do is an order of magnitude more than what they are doing.
One of the reasons the USSR fell was information overload. Things were changing fast, and their system could simply not keep up.