Both China and Japan have extremely high amounts of debt relative to GDP, and are both are still increasing spending.

Short term, the Chinese stock market will continue to fall - it's still incredibly overvalued from the bubble. US and European stocks should continue to be slightly affected. Anyone with a clue has already priced the Chinese effect into stock prices.

Short and mid term, any money that can will continue to attempt to escape China. Land/Houses/Industries in popular areas may be a little overvalued in the popular places in the US and Europe.

So we can expect Bay Area home prices to continue their trend for a bit longer?

Yes. At least until people figure out that life can be awesome (and real estate is 1/4 the price) outside it.

Land values are not about lifestyle and preferences, they are about interest rates, scarcity, and proximity to economic production.

As services and particularly technological services become more important and create more value, the value of land proximate to these activities will continue to increase, because the business depends on talent, and network power i.e. relationships with other individuals (which require proximity). As for interest rates, I forecast they stay low for decades as inflation will remain suppressed.

There could be several cyclical downturns along the way but I can't see any way land values in the Bay Area don't appreciate at an annual rate greater than national CPI ~30 years from now.

Until tech ecosystems outside the area are comparable there will probably always be waves of new people willing to give it a try to counter those moving somewhere more affordable.

Alan Blinder recently estimated that a severe recession in China would have an effect on America of roughly .2% of GDP

Unless China follows the playbook laid out by Tom Clancy in Debt of Honor. :-O

Facing an economic crisis, Japan's ruling corporate cabal, led by Yamata, decides to take military action against the U.S. Along with covert support from China and India, they plot to curtail the American presence in the Pacific and re-establish the Greater East Asia Co-Prosperity Sphere.

https://en.wikipedia.org/wiki/Debt_of_Honor

If the Chinese economy suddenly shrinks due to financial troubles, the exports from the EU to China would shrink, too.

China still holds large amounts of US debt. Refinancing US debt might become problematic if the Chinese need to stop lending.

You are seeing implications already with declining commodity prices.

I just read that house prices in Sydney, Australia are dropping month by month for the first time in very very long time.

Probably more things if you look around a bit.

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I don't think we will see the growth rates in China drop below 5% as the growth is very different from what we have in the west. Essentially it is the rapid modernisation of an economy via strict central governance.

Think about it. Why would the GDP pr person in China be much different from the GDP pr person in Taiwan?

China will continue to have "supernatural" growth for the next many years.

I have the feeling we would have to bail out a lot of banks.

Nothing, for example the United Kingdom has been in debt since the 1600s or 1700s.