Last month China started construction on the world’s tallest building – named Sky City in Changsha. To be completed next year, it will stand 838 meters, 10 meters higher than the Burj Khalifa in Dubai.
However, the Skyscraper Index has a long history of showing a connection between the construction of the world’s tallest buildings and an upcoming economic collapse.
Andrew Lawrence, pioneer of the Skyscraper Index and head of Hong Kong and China property research at CIMB Group, says “The Skyscraper Index has a good 150-year correlation between the world’s tallest buildings and economic slowdowns and recessions. For China, there is no reason that correlation will change.”
The Skyscraper Index shows that the construction of every single “world’s tallest building” over the past century has been followed by an economic downturn in that nation.
On October 23, 1929 New York’s Chrysler Building was completed, making it the world’s tallest building at the time. Five days later the Wall Street Crash set off the Great Depression.
In March of 1996 Malaysia finished the Petronas Towers, the tallest building in the world at 452 meters. Sixteen months later the Asian financial collapse hit both Malaysia and the region.
In October 2009 Dubai completed the Burj Khalifa. Just two months later a massive debt crisis hit Dubai as a global financial crisis sent world markets reeling.
Other examples of the building of the world’s tallest skyscrapers followed by economic crisis include the Taipei 101 in Taiwan and both the Empire State Building and World Trade Center in New York City.
Lawrence says that time and again, we see that large expansions of credit are closely associated with both skyscrapers and economic busts. “Like the one we saw in China post-2008,” he says.
“China will be building over 40% of the world’s skyscrapers over the next four years so clearly there’s a building bubble,” adds Lawrence.
Michael Pettis, a Peking University finance professor and expert on China, wrote in July “The China story has taken a serious turn for the worse. China, it now seems, is about to collapse, and along the way it may well bring the world economy down with it.” Image/CNN