You short commodities. A sharp downturn in the chinese housing market will cause a lot of Chinese to lose their savings which are tied up in property, causing a recession, and sharply reducing commodity prices.
This is something that the Chinese government wouldn't mind too much either because the rise in commodity prices beyond a certain point (and we're getting pretty close) will cause political disruptions- which is the absolute last thing that the government will accept.
There was a confluence of factors that drove the unrest these past few months in the middle east, but one of the biggest was the sharp increase in commodity prices, especially food and basic supplies.
I think the link is too far, so you'll be exposed to a lot more than just the housing market. In finance, if you have a certain bet, you bet on that (and hedge against all other changes), in order for your returns to be based on your bet.
Interesting... what about being long gold? I imagine that a housing crash in China would drive investors into precious metals due to the lack of options available for chinese savers.
