Imagine a brand new city built for 18 million people—yet only 4.5 million live there. Imagine massive, state-of-the-art university campuses—15 of them—in a city that nobody lives in. Imagine another city built for 1 million—but only 25,000 people call it home.

Picture 20 more such cities—complete with vast freeways, brand new performing arts centers, the biggest shopping malls in the world, museums, government buildings, schools, fancy houses, expensive apartment towers, libraries and universities, police and fire stations, parks with fancy landscaping, community centers, giant parking lots—and no people. And the building continues.

Only in the “economic miracle” that is China could this be possible.

Yet, sometimes supposed “miracles” turn out to be little more than sleight of hand. In this regard, facts and hard evidence are required. A picture from on the ground can be worth 1,000 words. In China, pictures from its many ghost cities give stark warning that China’s economic miracle may really be an economic mirage. If this is the case, China and thus the rest of the world may be in more trouble than the West can imagine.

The images are hard to argue with. The economic reality facing China is that much of its growth is fake. For sure, China has been the recipient of a mass wave of manufacturing insourcing—benefiting from the exodus of high-cost industries in Western nations. The nation’s economy has made huge leaps and bounds over the past decade. Its technological know-how is greatly improved. Its position as a global economic heavyweight is beyond dispute.

But at what cost has China grown so quickly? How was the miracle of seemingly uninterrupted double-digit growth held up decade after decade? The world may soon find out how much of China’s booming command economy was really a mirage after all.

China is entering the “danger zone” where a financial crisis may become more likely, warned Bank of Japan Deputy Governor Kiyohiko Nishimura last week.

China’s massive real-estate boom has now eclipsed that of Japan during the 1980s. Construction spending in China hit a whopping 12 percent of gross domestic product last year. In Japan it peaked out at 10 percent. Everyone knows what happened in Japan next. Stocks and real estate fell by 75 percent and still haven’t recovered.

Sometimes these booms can go on for a long time, noted Nishimura. Debt and housing bubbles can remain “benign” as long as there is a growing demographic of workers. But they turn malignant when the numbers of working-age people shrink in comparison to the number of retirees.

According to Nishimura, China is facing the unprecedented challenge of an aging workforce (due to its one-child policy), a real-estate bubble and a debt bubble—which makes a “financial crisis seem more likely.”

There are grave implications for China’s economy if debt levels do not continue to expand.

In China, government leaders set gdp growth targets. The regional managers do everything they can to meet the targets lest they fail and be replaced. The easiest way to boost gdp is construction. Often this leads to building for the sake of building, roads for the sake of roads, bridges to nowhere, and as the above video shows—cities for no one to live in.

This has led to malinvestment on an unprecedented scale. When a project is decided upon, government contracts go to state-run engineering and construction companies. But the state-run builders are broke. It is estimated that 25 percent of all Chinese state-run corporations lose money. So the state-run builders go to the state-owned banks for loans. The state-owned banks provide the loans, not based upon merit or economic viability, but because they too need to meet state-mandated targets. To meet mandated lending targets, standards are dropped. Loans are issued for the sake of loans.

Thus the economic miracle/mirage is perpetuated.

To put China’s property boom in perspective, in coastal regions the average house costs 18 times the median salary in those regions. In America, the equivalent would be expecting someone making $60,000 to purchase a $1.1 million house.

In other words, it is not the typical Chinese person buying all the newly constructed homes. It is wealthy speculators who can borrow cheap money from the banks.

This kind of debt-fueled expansion is not sustainable. Although the economy is growing, its working class is still very poor. Its consumer economy is still in its early stages of development.

That means that China is still dangerously dependent on exports for the lion’s share of its wealth. Over half of its gdp comes from selling products abroad. And herein is the pin that may bust China’s bubble.

The money that underpins China’s massive debt bubble—the bubble fueling China’s construction and property boom that provides jobs to untold tens of millions—is almost solely fueled by exports. Exports provide the money that is leveraged up by the banks and injected into the economy to meet the various government growth mandates.

And what is happening to exports?

Reports from China give cause for worry. The Telegraph’s Ambrose Evans-Pritchard reports that during the summer, China’s export growth fizzled. Komatsu’s index of excavator usage, which Evans-Pritchard notes is a proxy gauge of construction activity, plunged by 13 percent in July. The ship-building industry is melting down too. According to Evans-Pritchard, Rongsheng, China’s largest shipbuilder, has not had a single order this year.

The New York Times says that unsold goods are piling up all across China. Factories are stuffed to the gills with unsold inventory. Exports are crawling to a halt. Automobile factories are running at 65 percent capacity and still stuck with a glut.

But this should not come as a surprise. Europe’s economy is in full contraction. The United Kingdom is in recession. Japan was shrinking earlier this year. And America may now actually be in recession too.

In the near term, China’s economy is destined to slow—by virtue of the fact that there is simply no one to buy more of its stuff. The question is whether China will suffer a soft landing, or crash and burn.

If China crashes, the implications are hard to overstate. There could quickly be tens of millions of unemployed Chinese with few options but to join the military. We like to think that these kinds of problems ended with World War ii, but that too is a mirage that may be shattered along with China’s debt bubble.