Zhang in 2007 persuaded Pan to take the company public in Hong Kong and cash in. The timing of the initial public offering on October 8, 2007, was exquisite. Less than a month later, global markets began to tumble in the early days of the credit crisis. They raised $1.9 billion -- the biggest IPO by a property company in Hong Kong that year。

　　Soho China shares traded at HK$4.92 on Aug. 3, 40 percent below the offering price. After plummeting along with the rest of the stock markets during the financial meltdown, Soho China’s stock outperformed the Hong Kong and Asia Pacific property indexes almost twofold since it hit bottom in October 2008 through Aug. 3.

　　Wall Street Wolves

　　The IPO, which was underwritten by Goldman Sachs, HSBC Holdings Plc and UBS AG, marked a change in Zhang’s relationship with Wall Street. Only two years earlier, she had publicly lambasted investment bankers as wolves. Today, Zhang is more circumspect when asked about her Wall Street experiences。

　　“I had better be careful these days,” she says. “I am their client. I work with them very closely。”

　　Today, the Soho name appears on 14 developments in Beijing, a city of 22 million people. In August 2009, Zhang and Pan made their first move into Shanghai with their purchase from Morgan Stanley of the Exchange, a 50-story office building on Nanjing Road, Shanghai’s main shopping street。

　　Now called the Exchange-Soho, the development is a prime example of the real estate bubble in China, economist Xie says. Soho China paid Morgan Stanley 2.45 billion yuan for the building -- the equivalent of 34,000 yuan per square meter. In the first quarter of 2010, Zhang says, she was selling office space in the building for an average 61,500 yuan per square meter, almost doubling her money. That works out to $843 per square foot -- more than twice the $381 per square foot that HSBC made when it sold its New York headquarters on Fifth Ave. in October。

　　Feared a Bubble

　　“Chinese property prices are 100 percent higher than can be justified,” Xie says。

　　Zhang, who early this year feared a bubble, now says her own research reveals that the property market is regaining its sanity. She says real estate prices have been cooling since April, following the government’s lending restrictions, but aren’t headed for a collapse。

　　“We know from our own experience the prices are staying flat,” she says。

　　Stephen Roach, Asia chairman of Morgan Stanley, agrees with Zhang. China’s property bubble is confined to luxury properties, he says. Roach says the lending curbs are successfully deflating high-end speculators in the top 10 cities, which collectively account for just six percent of the total market。

　　“It’s a micro bubble, not a macro bubble,” he says。

　　Slower Growth

　　Roach says the drop in the high-end market will slow economic growth, which he estimates will fall to between 8 percent and 9 percent by the end of the year。

　　“This would be a much more sustainable growth rate for China -- especially in light of the recent uptick in inflation,” he says. Inflation reached 3.1 percent in May, the fastest growth in 19 months, before falling back to 2.9 percent in June。

　　To stabilize the housing market, China needs to build more affordable dwellings to be sold to the 500 million Chinese whose income has been rising for a decade, says Donald Straszheim, Los Angeles-based senior managing director and head of China research at ISI Group, a firm that advises institutional investors. He says the government should put together a long- term program to increase construction of low- and middle-income housing。

　　Zhang’s Forecast

　　“If they don’t, the massive number of people getting richer each year will continue to bid up house prices and frustrate Beijing,” Straszheim says. “When the government takes the lid off lending, house prices are going to go back up again. That’s a persistent boom-bust cycle。”

　　Zhang says success in real estate has come down to guessing what the government will do next. In June, she gave her prediction at a JPMorgan Chase & Co. conference attended by almost 2,000 foreign investors in Beijing。

　　“Everyone was so pessimistic, and I was saying that in the next six months or a year, prices will go up again,” she says. “My guess is that it is austerity now, but at some point it will become stimulus again。”

　　If the former sweatshop worker is right, her latest property investments will likely prosper -- as will China, perhaps sparing the global economy the threat of a double-dip recession。

　　(Bloomberg Markets)