>the value created in China from producing most of the physical items we consume gets parked in real estate and stocks in the West because the Chinese political system is too risky

Really? Chinese are notorious for investing in the Chinese real estate market, and investing in stocks is avoided. That's at least what most people seem to follow. The hyper-rich have probably better investing ideas..

>On the other hand, the supply is physically limited due to the geographic constraints.

Real estate is not expensive because of lack of land, since almost every country has large areas of cheap land. Real estate is becoming more (and already is) expensive for so many because the trend is to move into bigger cities, inside which supply is limited. (And the supply is typically limited by regulation, not lack of land per se).