January 5th, 2011
05:49 AM GMT
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Hong Kong, China (CNN) – When the Burj Khalifa officially opened its doors in Dubai last January as the tallest building in the world, the fanfare came weeks after the emirate suffered a debt crash.

The building became the latest evidence of the correlation between building booms and economic crashes, popularized in 1999 when analyst Andrew Lawrence released his first “Skyscraper Index,” which showed how completion of the world’s tallest buildings coincided with economic downturns, from the eight-story Equitable Life Building in New York (which opened during the 1873 depression) to the Petronas Towers in Kuala Lumpur (opening during the 1997 Asian Financial Crisis).

Now the latest version of Lawrence’s index raises alarm bells for China. “China skyscrapers are getting higher and higher, so it may be the start of a potentially bigger building boom,” the Hong Kong-based analyst for Barclay’s Capital told me.

“Is China building its way to a bubble?” Lawrence wrote in a report released Tuesday. “It may have started with the Tower of Babel, but over the past 140 years, there appears to be an unhealthy correlation between building the world’s next tallest building and an impending financial crisis: New York 1930, Chicago 1974, Kuala Lumpur 1997 and Dubai 2010. The world’s tallest structures rarely stand alone, with skyscraper building booms coinciding with economic corrections.

“Over the next six years, China will complete 40 percent of all the new skyscrapers under construction, expanding the number of skyscrapers in Chinese cities by over 50 percent,” Lawrence said.

Lawrence notes that world-record breaking buildings aren’t built in isolation – as the boom in China shows, and in Dubai before it, skyscraper building happens in cycles. “It starts when developers have lines of easy credit to finance projects … a time when there is more risk-taking by banks,” Lawrence said. “Also there is a desire to create a trophy building in your city, to leave some symbol behind.”

By the time the building spree is completed, the local economies have turned, Lawrence said.

One important caveat: As it now stands, there are no known plans in China – or anywhere else in the world, for that matter – to build a skyscraper that can knock the Burj Kahlifa off its mantle. At 823 meters, the builders of the Burj Khalifa seem intent on it staying that way for a while (by comparison, the previous record holder – Taipei 101 – was just over 500 meters tall).

Still, past skyscraper building booms have augured economic downturns without producing a building with record-breaking heights, Lawrence said. There was a tall building boom in the 1980s in the U.S. that didn’t challenge the height of the Sears Tower in Chicago (the record holder then) – but that building spurt tumbled when the nation’s savings and loan industry crashed, Lawrence said.

So as skyscrapers rise in record numbers across the China city landscape, is a crash not far behind? “It’s worth investors paying attention to,” Lawrence said.



soundoff (41 Responses)
  1. go China go

    go China go!!! show the west what you made of and tell them to get lost!!!

    January 5, 2011 at 6:35 am |
  2. Raj

    Very silly comparison. The tallest skyscrapers are just the outliers in any building boom. If we were just to focus on inner city building, Dubai has probably built 20-30 buildings over 30 stories. In China there have been several 1000 buildings in the 30-50 story range. There is a huge migration and industrialization process in China that drives real estate demand. Of course the supply might be over or under by a margin of 10%-15% leading to a pricing fluctations. Dubai however has built a tremendous amount of real estate with very low population growth and almost zero internal rural/urban migration. The only demand is from foreign populations to whom they do not give citizenship thus creating a disincentive from investing in the market. Dubai's real estate surplus is doomed and the Bhurj Khalifa is just an outlier symbol. In 30 years there will be half empty buildings and roads decaying in the sand Dubai while China will be the worlds largest economy.

    January 5, 2011 at 6:37 am |
  3. nihalsam, switzerland

    The higher you go, the harder you fall.

    January 5, 2011 at 6:54 am |
  4. kcheng

    How about giving TAIWAN its due respect. Everyone jumps from the Sears (Willis) Tower to the Petronas Tower in Malaysia to the Burj in Dubai, UAE to some phallic structure in China! What about the Taipei 101 building in TAIWAN that was the tallest building in the world for 6 years until the Burj took the honor. YES there is a cool looking structure in Taiwan called the Taipei 101!

    January 5, 2011 at 7:14 am |
  5. nenkaf

    i do not believe there are greedy bankers ready to circumvent the moral codes of a chinese govement. therefore it will be very difficult for a state run capitalism to face that. plus iff china gets broke all they need do is ask uncle SAM to give them their money back and then carry out a bailout cause america showed them and dont dare call that socialism cause its an american policy

    January 5, 2011 at 7:26 am |
  6. Bijou

    kcheng.....it was already mentioned in the main article.....read the article first before commenting.
    totally second you Raj,China aint nowhere near doom Ryan...let's all get learning Mandarin and accept facts!these guys r the future power....if u dont wanna,well,there's plenty of room on Mars to build your own superpower!

    January 5, 2011 at 8:00 am |
  7. Paul

    The hate filled cnn has become more bitter and resentful for no reason. They want us to fail.

    January 5, 2011 at 8:01 am |
  8. egalira

    No correlation, just some coincident facts. % of skyscrapers that didn't promote a bubble, a lot. Just to mention some: not the case for 101, Sears Towers, Jin Mao Tower and so on.

    January 5, 2011 at 8:05 am |
  9. jun

    Ryan, shut up your month and give some respect

    January 5, 2011 at 8:11 am |
  10. achun

    I would rather say you were a fortune-teller than a economist.

    January 5, 2011 at 9:08 am |
  11. Manuel Vilhena

    Is there really a relation? Time will tell.

    January 5, 2011 at 9:29 am |
  12. james

    'go China go' ... ha ha... ha...

    China is a place where 800 million people don't even have flushing toilets.

    But they have money for empty skyscrapers?

    Ha ha ... ha...

    January 5, 2011 at 10:06 am |
  13. jason

    Being American at 39 yrs old, having left American to live in China 3 years ago, due to the fact that the US does not have jobs to put food on the table, you can clearly see how messed up the US really is...here in China, the "commies" as you ignorant people call them, do not allow 100% financing, or "stated income" or to purchase multiple houses, which caused the big mess in the US today...so there is regulation here to keep from having a financial crash like in the US...you actually have to HAVE money, and MAKE money to get a loan...not some "shady" character that has screwed many people right to the streets of homelessness and poverty at your neighborhood "Mortgage Dealer"...so before you knock China, do some research from the outside in...you will think twice about the "commies", they own the US, they have loaned the US trillions to keep them afloat..Which I doubt the US will ever pay back...they would give up land in North America instead....and as much as I love my home country, it does not put food on the table or allow me to look forward to retirement....good luck

    January 5, 2011 at 10:35 am |
  14. jason

    PS: the toilets do flush here in China...if you look at yours, it says "made in china" just like your shoes, shirts, underwear and everything else in your house, or wherever you live...

    January 5, 2011 at 10:42 am |
  15. Weebie

    Rubbish Journalism at it's finest.

    January 5, 2011 at 10:50 am |
  16. vugar agamalioglu

    hello china or dubai üant to shoü üorld they got something but they got nothing

    January 5, 2011 at 11:19 am |
  17. sandeep - Dubai

    Dear Editor

    While lot of comments shows jealousy for chineses and there is some internal feeling of jealousy happens when a country like USA which now has shanty towns in sacremento (What a PITY of USA) and 7% of population is taking food stamps (Begging for food).

    USA printed billions of dollars as part of QE2 and still its economy sucks.

    What chinese are doing is that they hold these useless dollars in foreign reserves (2 Trillion of US $) and are making a good use by building roads, bridges, buildings in 1000s of them. They are making good use of useless dollar which is loosing its value day by day and with 10 trillions in debts, these green currency is already getting RED.

    I am converting all my cash to actual GOLD and other commodities.

    Also some commenters like (James and Ryan) sure have not been out of USA even out of their villages all their life and comment on other countries, i can say they are frustated to see oprah winfrey showing shanty towns in USA, where white men and babes pee on roads and farms and they have wrong statistics of 800 million not having flushing toilets.

    I having travelled more than 25 countries and some even 23 times, i can really say, chinese are here to stay economically superpower and USA is F****d badly, even ZAMBIA in Africa has more better road and street lighting than highways of LONG ISLAND and Zambians spend more in newly built malls.

    January 5, 2011 at 11:41 am |
  18. lefthandside

    China will get the last laugh. Wait and see.

    January 5, 2011 at 11:52 am |
  19. irsyad

    ummm actually Raj Dubai's population rose from 600,000 people in the 90's to around 1.3 million today.

    January 5, 2011 at 11:55 am |
  20. Khurram

    I agree with achun

    January 5, 2011 at 12:31 pm |
  21. Eddie2010

    james: do the math. China's population is 1.3 billion. If you say that just 5% of the population has what we would call a decent income and 95% of the population are dirt poor, that's still 65 million people that have more money than you...

    January 5, 2011 at 12:44 pm |
  22. hahah

    James those 800 Million people don't need flushing toilets.

    Cause they have your jobs and you'll be begging for their poop cause you can't feed your family.

    January 5, 2011 at 12:48 pm |
  23. HAHAHA

    LOL Even CNN's jealous at China's boom. GO CHINA! Show them that hard work really does pay off unlike those people who sit in CNN's offices making up this jealous turd.

    January 5, 2011 at 1:36 pm |
  24. Codin

    It s Burj Khalifa not Kahlifa..

    January 5, 2011 at 1:43 pm |
  25. Commenter

    Mindblowing and surprising on what it's been done but concerned and sceptical on what lies ahead...

    January 5, 2011 at 4:47 pm |
  26. bridgmjm

    The faster you go the smoker you get.

    January 5, 2011 at 5:38 pm |
  27. Hazel

    And when they finally build the tallest building in just 1 year or less, the building will be able to fight against earthquake, tsunami, cyclones, etc. But it will most likely to fall down in one piece because of its foundation, and we will start seeing dominoes of building.

    January 5, 2011 at 5:44 pm |
  28. Moore

    The skyscraper doom index has a lot of flaws.. there are countless skyscrapers that were built and no doom and gloom happened after they finished construction, one example is Taipei 101, tallest building in the world for 6 years.

    January 5, 2011 at 8:30 pm |
  29. Imhotep

    The reason Taipei 101 is seldom mentioned is because it does not look very attractive.

    January 6, 2011 at 9:00 am |
  30. Steve

    Lol all the Chinese students here supporting their beloved, and those westerners here jumping on the China band wagon (rather bullet train heading straight off the cliff).

    Lol I'm gonna wet myself when you egg on your faces!

    This sucker's goin' down!

    January 6, 2011 at 9:06 am |
  31. Pixee

    My computer was made in China. Hold on, let me reboot....

    January 6, 2011 at 12:44 pm |
  32. Mike

    China has the biggest bubble in the history of the world on its hands, don't fool yourself. Housing prices in Beijing have reached 22 times average income, when in the 1980s in Tokyo it only reached 9.4. Get a clue people, none of this makes sense. Even after the US went through a similar boom in the 1920s it ended in a great depression.

    Once again, the US's free market capitalism will get the last laugh.

    January 7, 2011 at 5:03 pm |
  33. Sourgrape

    A great many Americans have been presented with only negative news about China by their media for such a long time that they have absolutely no idea what is happening in that country. When news about supercomputers, bullet trains, stealth fighters and skyscrapers suddenly come out of China it is easy to understand why there is so much denial and ridicule coming from them. Denials and ridicules will not cause China to collapse, nor would they help the US economy get any better either.

    January 7, 2011 at 9:08 pm |
  34. Txadams

    Many cities in China are ghost towns with malls and skyscrapers left unfilled. They can hide this bubble but all the pollution and raising food prices will catch up with them. I admire their need to be modern but it'll blow up in their face if they don't work towards the needs of there rural poor.

    January 8, 2011 at 4:31 am |
  35. Spock_rhp, Miami, FL

    Confounding all the western analysts may yet occur. Chinese commercial and industrial building projects tend to be financed with loans from Chinese banks which never need to be paid back. That's as stable a financing source as cash equity.

    Can such a system get out of whack? yes. but the likely form of a 'crash' will be unlike anything seen in the West. It may, one day, come down to the central government being unable to pay its bills because the Chinese people have withdrawn all trust in their banks and currency. That day could well be 50 years in the future.

    January 9, 2011 at 12:23 am |
  36. ijohk

    yes it (the crash) is approaching fast

    January 9, 2011 at 3:08 pm |
  37. romei

    China law are clear and strict , bandit such goldman sack, lehman , AIA and wallstreet conman gang are not exist / in death row in China .. so you should go and see Shanghai and Chengdu to see how the economic works .. then you write ...

    January 10, 2011 at 12:49 pm |
  38. ijohk

    My message is connected with share bazaar.............

    January 13, 2011 at 9:27 am |
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    October 5, 2012 at 2:48 am |

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