20 January 2011

Potemkin China, Empty Skyscrapers, Cargo Cult Cultures

Chinese government officials believe high-rises "show their progress in terms of urbanization and modernism," spur wider development by boosting investor confidence, and symbolize "a city's desire to become modern and international," says Chiow, a Chinese-American based in China for the past 15 years. _USAToday_via_ImpactLab
Lawrence showed that in almost all cases the initiation of construction of a new record-breaking skyscraper preceded major financial corrections and turmoil in economic institutions. Generally, the skyscraper project is announced and construction is begun during the late phase of the boom in the business cycle; when the economy is growing and unemployment is low. This is then followed by a sharp downturn in financial markets, economic recession or depression, and significant increases in unemployment. The skyscraper is then completed during the early phase of the economic correction, unless that correction was revealed early enough to delay or scrap plans for construction. For example, the Chrysler Building in New York was conceived and designed in 1928 and the groundbreaking ceremony was conducted on September 19, 1928. "Black Tuesday" occurred on October 29, 1929, marking the beginning of the Great Depression. Opening ceremonies for the Chrysler Building occurred on May 28, 1930, making it the tallest building in the world. _Mises

Table 1: World's Tallest Buildings
Completed Building Location Height Stories Economic Crisis
1908 Singer New York 612 ft. 48 Panic of 1907
1909 Metropolitan Life New York 700 ft. 50 Panic of 1907
1912 Woolworth New York 792 ft. 57 ——
1929 40 Wall Street New York 927 ft. 71 Great Depression
1930 Chrysler New York 1,046 ft. 77 Great Depression
1931 Empire State New York 1,250 ft. 102 Great Depression
1972/73 World Trade Center New York 1,368 ft. 110 1970s stagflation
1974 Sears Tower Chicago 1,450 ft. 110 1970s stagflation
1997 Petronas Tower Kuala Lumpur 1,483 ft. 88 East Asian
2012 Shanghai Shanghai 1,509 ft. 94 China?
If large buildings are constructed due to high utilisation and strong demand for space, they can be very profitable over their lifetimes. But if a skyscraper is constructed as a symbol or monument to the "greatness of a nation's political structure," the building may remain the empty prayer of a cargo cult.
China is building 44% of the 50 skyscrapers to be completed worldwide in the next six years, increasing the number of skyscrapers in Chinese cities by over 50%, says Andrew Lawrence, an Asian property analyst at investment bank Barclays Capital.

China is already host to six of the 15 tallest, completed buildings in the world, according to the Council on Tall Buildings and Urban Habitat, at the Illinois Institute of Technology in Chicago.

..."The appetite in China for high-rises, in the last five years and the next five, is bigger than ever before in the history of building," says Silas Chiow, China director for Skidmore, Owings and Merrill, the U.S. architectural firm, founded in Chicago, responsible for the Burj Khalifa.

The firm is currently engaged in 50 China projects, including the tallest buildings in eight separate cities.

Chinese government officials believe high-rises "show their progress in terms of urbanization and modernism," spur wider development by boosting investor confidence, and symbolize "a city's desire to become modern and international," says Chiow, a Chinese-American based in China for the past 15 years. _USAToday_via_ImpactLab

China is already full of "ghost cities," "ghost housing projects," "ghost office complexes," and "ghost shopping malls."

There is no denying the huge number of people living in China -- many of whom could use better and larger living and working space. But the economic structure of Communist Chinese society is rife with the mal-allocation of resources and enterprise. Corruption permeates the culture, driving much of the "road to nowhere" construction frenzy. Too much of the GDP-inflating construction is of a shoddy nature -- certain to collapse far sooner than projected lifetimes suggest.

Will the "Skyscraper Index" prove prophetic for Potemkin China of the cargo cult, or will the middle kingdom defy the curse of the world's tallest buildings?

More on skyscraper index:
From Mises.org
From CNN here and here

China's empty skyscrapers and office buildings

Amazing satellite images of some of China's ghost cities

World's loneliest shopping mall

More: And just in case you are still thinking that China may be ready to lead the world, perhaps you should think again:
We hear constantly how China's economy has "leapfrogged" other nations and now ranks third in the world — still behind the U.S. — with a total GDP of $3.3 trillion. The truth is more complex.

China has 1.3 billion people. So you're spreading that economy among one-sixth of the world's humanity. As the chart shows, China's economy on a per-person basis — the real measure of success — doesn't even come close to ours. The average American produces over $42,000 a year in goods and services; the average Chinese produces $2,800. That's an enormous gap in productivity.

Moreover, in its recent rankings of economic freedom, the Heritage Foundation put China 135th out of 179 countries. The U.S., even with all its current problems, ranks ninth. Who's the leader?

Citizens in big cities such as Beijing and Shanghai live a privileged existence, well-documented by the Western media. Deep inside rural China, however, hundreds of millions live in near-absolute poverty. This isn't a country ready for global economic leadership.

China's economic success has been driven by mercantilist policy of beggaring its own people in the interest of building up massive trade surpluses. Its foreign currency holdings now total $2.9 trillion, and most of that is in U.S. Treasuries and other dollar-denominated assets. That's China's hole-card in talks with the U.S. _IBD

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2 Comments:

Blogger kurt9 said...

Building 100 floors and more are called "super-talls". More super-talls have and are being built in China and the Middle-east than anywhere else in the world. The construction of super-talls always indicate an obsession with status as there is no real economic return on super-talls, compared to their costs.

Thursday, 20 January, 2011  
Blogger gtg723y said...

Well I would rather have substance. I do think we should consider redoing our major international airports to look like grand central, just a good welcome home.

Thursday, 20 January, 2011  

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