The $450,000 penthouse on the 33rd floor boasts tropical hardwood floors that give way to marble bathrooms. Palm trees fringe the swimming pool downstairs, and elephant statues stand guard over the Jacuzzi. In an adjacent spa where the list of skin treatments is as long as a dim sum menu, orchids float in ceramic bowls.

"Seaside Lifestyle," declares the sign on the front of the 11 towers of the Paradiso, a project that when finished will have 2,000-plus apartments, restaurants, tennis courts and a clubhouse with sweeping views of the South China Sea.

But for China Vanke Co., the developer seeking buyers of space in this palatial undertaking, the view in the other direction could spell trouble: the construction cranes, scaffolding and banners promising cheap financing that mark the sudden development of a new urban landscape.

The same scene is unfolding in most of China's largest cities, a product of the government's 1998 decision to begin eliminating free and subsidized housing. That forced households to reach into savings to buy or rent homes, spawning an investment boom no less intense than the 1990s Internet frenzy in the United States.

Even for the world's most populous country and one of the fastest-growing economies, the flood of real estate investment may be more than the market can absorb. Amid the digging, pounding and welding that have become commonplace in China's cities, policymakers are concerned that a dangerous speculative bubble is in the making.

Last year alone, $95 billion flooded into real estate, nearly a third more than the year before, according to the People's Bank of China, the central bank. Last month, China's Ministry of Land and Resources issued what it called an "urgent notification," calling on all city and provincial authorities to look closely at ongoing development of homes, offices and high-tech parks to guard against overbuilding.

"There is a tendency toward a bubble if the central government doesn't take steps to cool off the market," Vanke's chairman, Wang Shi, acknowledged in an interview at his headquarters here, an urban-chic glass-fronted building with skylights and exposed concrete beams. "If the current problem cannot be solved properly, then there is risk that this will lead to very, very serious problems later on."

Risk for developers spells risk for banks. With stock and bond markets still in their infancy, banks are China's primary source of capital. A bursting bubble would produce a fresh dose of bad debt, adding to a store of bad loans that some private economists say now totals $500 billion, exacerbating the gravest problem facing the country during its transition from communism to a market-based system. As of October, China's banks had roughly one-tenth of their $1.6 trillion in outstanding loans tied up in real estate -- $60 billion to developers and more than $90 billion in home mortgages, according to the Securities Times newspaper.

Last Wednesday, China's outgoing premier, Zhu Rongji, told the National People's Congress in Beijing that the government "must be extra careful about the rapid increase of investment in real estate."

The central bank announced in February that an investigation found that nearly a tenth of those loans violated state regulations. The bank specifically warned that no-money-down mortgages are illegal, along with loans to developers who fail to secure at least 30 percent of their project funding from other sources -- an indication that such practices have grown prevalent.

Excessive investment in real estate and a subsequent free fall in prices was a primary trigger of the financial crisis that tore through much of Southeast Asia and South Korea in 1997 and 1998. In China today, 26 percent of office space stands empty, according to the state-controlled China Securities News newspaper, and prices are beginning to fall. Nearly 20 percent of the nation's housing stock is vacant, according to the China Real Estate Association.

Ten years ago, China experienced a disastrous real estate bubble that caused several lenders to collapse when the bubble burst. Vanke's Wang maintains that banks and developers have since learned their lessons. But even as sales increase in most major cities by more than 10 percent a year, investment grows at nearly three times that rate. Developers are again heavily leveraged, with debt amounting to about 75 percent of their assets, according to industry executives -- 10 percentage points below the peak of a decade ago but still alarmingly high, Wang said.

In addition, large sums of capital have been squandered on overly speculative investments and outright corruption. Some developers have used fake sales contracts for their own yet-to-be-built units to obtain individual mortgages that they then plow into construction, according to the Beijing-based China Business newspaper. Private developers have borrowed money from banks to buy land rights -- only the state can own land -- then used those rights as collateral to borrow from other banks, multiplying the risks, a developer said. State-owned companies have used preferential access to cheap finance from state banks to erect monuments to their names -- towering office buildings whose construction was motivated more by ego than business sense.

"Even when no one moves in, they refuse to drop the price because they figure that it's government money anyway," said a Shenzhen business consultant.

Much of the new housing is priced beyond what Chinese consumers can afford. Generally, experts see housing prices of three to six times as high as the average annual household income as reasonable. Many major cities have average housing prices that are more than 10 times as high as the average income, according to Economic Daily.

"There's a speculative frenzy at the high end," said Fred Hu, a managing director at Goldman Sachs in Hong Kong. "There's risk of a correction."

Still, Hu and other economists see fundamental trends that support the overall direction of the market. China is home to some of the most prodigious savers in the world, and incomes are rising dramatically. A recent study conducted by the Asian Banker, a Singapore-based research group, found that China now has 65 million people who make at least $5,000 per year and 2.4 million with assets of at least $100,000.

Joseph Zimny, director of New Choice Mortgage Services, a finance company based in Shanghai, said that while luxury apartments in major cities -- those generally priced at more than $1,000 per square meter -- are often greatly overpriced, they amount to no more than 2 percent of the supply. "There is a lot of affordable housing," Zimny said.

Still, in Guangdong province in southeastern China, the first place to experience the market system, a glut of high-end property appears to be developing. The province holds 20 million square meters of empty space, almost one-fifth of all the vacant real estate in China, according to Economic Daily.

"Every compound has lots of empty units," said Zhou Xiaohua, a real estate agent with Trust Properties in Shenzhen, a city of 7 million in Guangdong that has exploded with an influx of foreign investment and wealthy home buyers from Hong Kong, less than an hour's drive away. "Lots of young people in Shenzhen are willing to buy an apartment. The problem is that most of these developers have focused on millionaires and rich Hong Kong buyers and there aren't that many millionaires in Shenzhen."

The epicenter of Shenzhen's boom is the Futian area, in the western part of the city. Ten years ago, it was largely farmland. Now, it is a grid of freshly tarred six-lane boulevards lined with half-built towers. Temporary dormitory blocks house thousands of rural migrant workers who have flocked here to pour cement and lay terra cotta tiles for wages of about $100 a month.

Investment has been propelled by a $2.4 billion plan to turn the area into a new city center, with a new municipal headquarters, Asia's largest exhibition center, a new library and an enormous shopping mall.

At one nearby complex -- two newly completed tan high-rises named City's Elite Homestead -- banners promise three-bedroom apartments for as little as $72,000, with $7,300 down.

"Basically, anyone can get a loan," said a saleswoman inside. "If we introduce you to the bank, you can get a loan. It's fair for everyone. It's just a formality."

Jin Pengke, a local marketing consultant, liked the location, but the price seemed high. "It's a buyer's market now," he said. "There are so many empty apartments. You can see they are all having a hard time selling."

A block away, four plain, white 32-story apartment buildings completed in 2000 and backed by the city government sat 20 percent empty, according to Wu Guangye, manager of Shenzhen Linchuanghui Industrial Co. "If they want to sell them, they are going to have to drop the price at least 10 percent," he said.

And farther west, "Elegant Life Downtown" -- 10 apartment blocks of 30-plus stories encircling a pool worthy of a tropical resort -- was going up in one shot, the work of a Shenzhen-based, state-owned company.

Across the street, a private Shenzhen developer was putting up seven other towers of similar scale, called the Galaxy International Park and Apartments. In the sales office, half a dozen young women in red blazers and blue ties waited listlessly for a chance to show the model units, some decorated in an Egyptian sphinx motif, others with furniture from Ikea. Three men in chef's hats and aprons stood behind a cappuccino bar offering complimentary drinks to couples filling out preliminary applications.

Outside, a street meant to carry workers to offices that have not yet been built was empty of traffic, though four men stood on the sidewalk, canvas bags of clothes slung over their shoulders, and gawked at the half-built spires. Farmers fresh from a 36-hour bus ride from Sichuan, they were in search of construction jobs and wondering where they would sleep that night.

Special correspondent Wang Ting contributed to this report from Shanghai.

An influx of foreign investment and wealthy buyers from Hong Kong have led to a surge in apartment building in Shenzhen. A worker adds buildings to a display in Shanghai. The boom is a product of the government's 1998 decision to end housing subsidies.