There's one guy in my compound who clearly has a few screws loose in his head and another friend in another compound has a similar character hovering around. They are rare because most probably get abandoned as babies or aborted if discovered to be handicapped as a fetus. It wouldn't surprise me if what you said about families hiding them indoors is still true is smaller cities and towns. It's crazy how many backward people there still are in this country. Let's remember that most people don't live in a developed first tier city so not much has changed in the mentality of small town/village/country people.

I'm just guessing, but maybe a bunch of the short-bus clientele check into the local DewDrop Inn for an early dirt-nap?

Not only in the "olden days" they do it.
I may suggest some reasons that you don't see that many retarded people in China :
1) if the child is retarded from birth, then usually the child is either sold or kept away from everybody (as it is considered a shame for the family)
2) during a pregnancy, the doctor would tell to you to a degree of certitude if the child would mentally or physically retarded, then the mother often takes the option to avort (even if late)
3) there is not that many facilities in China to provide help for the parents or for retarded people (no special schooling) and if there are, they are often quite expensive.
That's basically why.

I've seen a handful. I've heard that there aren't many because the parents hide them away at home so others don't see or they abandon them when they're young. No idea if that's true or not though.

  I saw a downs syndrome Chinaman, and guess what? Pudding bowl haircut. What is this a universal conspiracy!? Like they ain't got it hard enough already, let's give 'em pudding bowl haircuts till they all look like Moe from the The Three Stooges! Poor buggers.

They are all censored and hidden somewhere here............Normal Chinese are already a bit retard.............Imagine an official retard and you will know that word is a bit unjust and  not up to their standards yet

There's a mentally disabled lady opposite where I live, living in a garage, I once seen her jumping in a massive puddle for fun (she must be at least 50)......she's a nice lady though, I always say hello to her and she seems to be reasonably happy. Has a flat screen TV in there and is often outside communicating with people.

That said, there's also a 'Mental Hospital' (not my words) near here - maybe that's where they all are......my wifes cousin's wife (i.e. my sister, lol) works there.......next time I see her I'll ask a few q's!!!!

Good questoin, I'm afraid what you said about the social stigma and "losing face' still happens far too often today.

I've seen a few mentally handicapped students at schools I taught at. They were rarely part of the class and really didn't benefit from being in a "normal" school.  I had a kindergarten student once who was clearly autistic and when I mentioned to the parents that he might preform a lot better if he had more individualized teaching I nearly got fired from the school. Apparently his parents were in huge denial. Sad to see because the tuition was expensive there and the kid wasn't really getting anything out of it.

I met some retarded Chinese guys once, they were in a restaurant and started yelling "HALLO" when they saw my white skin. I got up to leave and realized it must be a special needs restaurant because I heard a bunch more "HALLOS" from other tables as I was leaving.

There were also a bunch of more out in the street! I was at a total loss. It must have been some kind of special needs day in the town I was in. 

Also, I was friends with a Chinese girl once and didn't even know she was retarded. I found out one day when she told me she planned on marrying a Chinese guy.