No One’s Talking About This Bubble in China

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A sign we’re heading into another major long-term downturn.

By Harry Dent, Economy & Markets Daily:

In 1928, construction on the world’s tallest building began in New York: the Bank of Manhattan Trust Building at 40 Wall Street. Today, it’s “The Trump Building.”

When its developers learned that the Chrysler Building would be even taller, they added three stories to the Manhattan Building to secure the title of “world’s tallest.” Then the Chrysler Building came along and added a giant spire, beating it by just over a hundred feet.

Of course, that didn’t last long either. Each of these buildings held the title for less than a year before the Empire State Building topped out at 1,454 feet, more than 400 feet taller than the other two.

And then: the economy collapsed. The Great Depression hit.

And it took decades for the global economy to recover – and it wasn’t until the 1970s before a taller building emerged.

Those buildings were the Twin Towers in the early 1970s, and the Sears Tower in Chicago in ’73. And then, right on cue, another major recession hit in the middle of the decade.

Notice a pattern?

It is no coincidence that in both cases, the construction of major buildings coincided with long-term economic peaks. It happened in the 1930s and again in the 1970s.

Historically, there have been clear peaks in skyscrapers when the economy is at a high. It’s like when the party’s raging and the whole world thinks the economy will never go down, these mammoth hunks of steel pop out of the ground as if to say the high will go on forever!

And I haven’t even said a word about where we are today…


That’s how many skyscrapers popped up around the world in 2015. It’s the largest number completed in a single year on record. Before this decade, it was usually around 20 or 30. Now it’s up to five times that! Oh, but it gets better!

The Council on Tall Buildings and Urban Habitat expects 135 skyscrapers to be finished in 2016, and another 140 in 2017.

And get this: the Council says the number of “supertall” skyscrapers (300 meters or higher) has doubled from 50 in 2010… to 100 in 2015 – just five years in the most artificial global bubble in human history. No coincidence there, either!

It should be obvious: the more the global economy expands, the higher and greater the number of major buildings that go up. And they concentrate in the leading countries and regions of the world at the time.

So it’s probably no surprise that China – a country that has overbuilt its infrastructure over a decade into the future, indebting themselves with tens of trillions of dollars – is dominating the current race for who will build the next tallest skyscraper in the world.

Right now, that title belongs to the Burj Khalifa in Dubai, standing at 2,717 feet. It was completed in 2010. The second highest – the Shanghai Tower in China, at 2,073 feet – finished last year.

But now China has plans to complete another project in 2017 – the Phoenix Towers in Wuhan, south-central China. The tallest will be the first ever to stand one kilometer high, or 3,280 feet. Oh, and it’s going to be pink!

China is not the only one in the current race. Saudi Arabia has plans to complete their own 3,280-foot Kingdom Tower by 2019 – just as oil has been crashing and its government deficits are swelling. It’s just a big ego game to these up-and-coming countries!

But China’s not only trying to build the world’s tallest – the country seems dead set on building as many of these puppies as they can, period!

The Skyscraper Bubble in China

Of the 106 completed around the world last year, 62 – or 58% of the total – were in China. The next highest was Indonesia with nine, the United Emirates at seven, and Russia with four. The U.S… only had two.

And it’s probably no surprise that China did the exact same thing the year before. In 2014, they finished 61 skyscrapers – just one less!

Frankly, if the global economy slows as much as I expect, some of these building slated for 2017 or later will get postponed, if not canceled.

So, here is another major sign, among many, that this is not just another stock and economic peak. Instead, this is a sign that we’re heading into another major long-term downturn – like the 1930s, and 1970s.

By Harry Dent, author of the brand new book, How to Survive (and Thrive) During the Great Gold Bust Ahead, where he warns investors that moving their assets into gold isn’t the safe haven they think it is. And why it won’t protect them from the biggest market collapse since The Great Depression. Get a free copy of his eBook here.

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  35 comments for “No One’s Talking About This Bubble in China

  1. Vespa P200E
    February 6, 2016 at 1:14 pm

    I recall Barron’s article about Skyscraper Index 8 to 10 yrs ago – that it heralds the peak economy and portend downturn round the corner. It used examples of Malaysia Petrona Tower in KL right before Asian 1997 currency crisis with dose of unpalatable IMF medicines for then Tigers. I’ve been to both PT (impressive) and Taipei 100 (overrated) and actually saw it go up while staying at Taipei Hyatt. I recall paying 45 USD for executive floor room at PJ Hilton near KL back in 1998 during the height of Asian currency crisis.

    Then the race started with the dreamers in ME and China fighting over the bragging rights. It’s not like China needs to build taller building due to limited land like say HK as Wuhan unlike SHAGhai is sort of country town inland so why the need for tallest building? All portend the downfall of once mighty Chinese economy and building boom thanks to easy money littered with ghost cities/flats/malls.

    BTW – in China you buy the unfinished flat with bare walls and floors, not even toilet, sink, room doors (other than front door), light fixtures that once cannot rent it. Besides its meant to be store of value and no longer new flat if lived in.

    And just like Japanse RE and stock bubble of 1989 – China will crash.

    • polecat
      February 6, 2016 at 1:46 pm

      In the coming centuries, many of these global spires will become the new wonders of the ancient world,…….what doesn’t get dismantled for scrap resources that is!!

  2. Nicko
    February 6, 2016 at 1:44 pm

    We now know the secret to Dubai’s skyscraper boom….they got cheap and skipped on the non-flammable external cladding.

    Gotta feel sorry for all the people who bought million dollar apartments. ;)

  3. Petunia
    February 6, 2016 at 1:58 pm

    The Burj on New Year’s Eve with a building burning down right next to it is one of the craziest things I have every seen. The ME needs outward signs of greatness because the inward ones are not so great.

  4. Lee
    February 6, 2016 at 4:30 pm

    Well I guess that Australia will do ok for a while as we had only ONE completion in 2015.

    Better watch out though we have 6 more 60 plus storey buildings being built in Melbourne now with another 27 either approved or proposed with 50 storeys or more – yikes.

    And for those in Sydney, yes we have more tall buildings here than you do…………

    Given our low population we do have a large number of tall buildings here in Australia:

    And PS:

    The auction clearance rate in Melbourne was a pretty good at 79% for the first real weekend back from the holidays. Must postpone that bubble bursting for another week…..again.

  5. Shawn
    February 6, 2016 at 5:11 pm

    How about the salesforce tower in San Francisco? With any luck housing and real estate will crash thereafter in the Bay Area.

    • February 6, 2016 at 6:04 pm

      As luck would have it, a Chinese property investment company is now trying to get a project in SF approved that will include two towers, the taller of which would be the second highest tower, just a little shy of the Salesforce Tower.

      • Toddy
        February 6, 2016 at 8:07 pm

        Meanwhile, the lot next to the Ask tower in Oakland is back to being fenced in completely after they did ground prep, and the pretty billboard rendering is gone. I guess someone bailed out.

      • k
        February 7, 2016 at 1:59 pm


        Let’s just hope they don’t use Chinese steel.


  6. John Doyle
    February 6, 2016 at 5:18 pm

    It’s worth reading Harry Dent’s whole presentation. China is only a small part of the issues we face that Sg Dent explains.

    If you click on ‘Quit’ it changes to the text.

  7. Ptb
    February 6, 2016 at 6:45 pm

    Wow, peak sky scrapers. I had to say it. Dent is not too credible. Sure, China is due for a hard landing, but I’d like to see more hard data to start comparing it to the Great Depression.

  8. RDE
    February 6, 2016 at 8:31 pm

    In many ways the skyscraper is the ideal construction form for a capitalist society. Mature capitalism requires creative destruction lest the basis for financialized growth grind to a halt.

    Companies like Apple do their part by churning out new electronic gizmos that obsolete everything that went before.

    Starting wars is the traditional mode of creative destruction, but even that has its limits when the enemies that the population has been propagandized to hate turn out to have impregnable defensive shields. Parachuting arms into the desert so anybody can pick them up and go looking for his tribal enemy is small potatoes. And there is a limit to how many AWAC’s you can sell in exchange for oil.

    Skyscrapers have huge advantages of scale over other construction styles. Not because they are cheaper to build, but because they are easier to unbuild. Even though they may be designed to withstand hurricanes, tidal waves, and direct impact by airliners it only takes a couple thousand pounds of well-placed thermite on the primary support columns to bring even the tallest crashing down in its own footprint.

    This opens up another cycle of bribery and profit. Just ask Larry Silverstein, who put up 14 million of his own money as down payment on a lease agreement for the entire World Trade Center complex. Two months later the buildings were a smoldering ruins, and after the lawyers were done collecting their pound of flesh, Silverstein collected 4.55 billion in insurance settlements. I’m sure he must have been shocked by such a turn of events—.

    • Robert
      February 6, 2016 at 9:21 pm

      If I put a down payment on an apartment rental lease, how do I get to collect the value of the building, instead of my lease money back, if the building burns down? I don’t get it.

      • Petunia
        February 7, 2016 at 1:01 am

        The World Trade Center was owned by the Port Authority of NY/NJ, a govt agency. Somebody told me that politicians can be bribed to do anything.

      • Nick kelly
        February 7, 2016 at 6:04 am

        You are right, the guy’s entire comment is nonsense, it’s just that this part is absurd.
        The cherry on top, however, is on the bottom-of the last sentence, implying that Silverstein expected the towers to be destroyed.
        A Zionist plot? But weren’t the perps anti-Jewish?

        As for the skyscraper being a capitalist engine of destruction (or whatever the guy said, I’m not wading through it again) it’s just a method of construction.
        The idea of having a steel frame or skeleton bear the weight, not the mason or brick walls, indeed debuted in the Belly of the Beast around 1890 and has since become standard for regimes of all political stripes including hard line Communist ones.
        But to relate back to Dent’s piece, it is this innovation that permits heights much over 10 stories- before that the weight of the stone or brick was the limiting factor.

    • nick kelly
      February 7, 2016 at 5:34 am

      OH,FFS sakes

  9. Jungle Jim
    February 6, 2016 at 8:33 pm

    Thinking about China’s building boom, reminded me of an incident some years ago. AP reported in May 2009 that in southern China, a real estate speculator who was heavily indebted perched on a bridge rail threatening to jump. A helpful passerby walked over, shook hands with the man and pushed him off.

    It was anticlimactic, the would-be jumper fell into a net the police had thoughtfully erected to catch him. The passerby reportedly told police that he did it because he was annoyed at the traffic jam the jumper was creating,

    I mention this only because these real estate booms contain a odd mixture of tragedy and low comedy. We never learn. The only thing we create is bigger and better venues for the denouements.

  10. as
    February 6, 2016 at 10:58 pm

    China still has a trade surplus of $50b a MONTH !!!

    That is a lot of excess production for a single country. Surely that gives them a chance to come out of this OK.

    • roddy6667
      February 6, 2016 at 11:22 pm

      The savings rate in China is 36%. They have a huge buffer of cash to ride out any rough times in the economy. Only about 10% of the people are in the stock market. The rest have cash or real estate.
      Americans have a negative savings rate. The few that have assets have most of it tied up in the casino called Wall Street, the first thing to crash in hard times.
      I put my money on the Chinese.

      • Nicko
        February 7, 2016 at 10:27 am

        China’s debt load is over 280% to GDP….higher than anyone else, yes, even higher than Japan. They are the Titanic heading full speed into an iceberg dead ahead.

        Can anyone blame the elite Chinese laundering their money as fast as they can to Vancouver buying up $2 million crack-shacks? ;)

        • roddy6667
          February 7, 2016 at 10:08 pm

          China went into debt building infrastructure. They built highways, residential mid-rises and high-rises, malls, factories, office buildings, industrial and business parks, airports, railroads, subway systems, electrical plants, heating plants, hydroelectric dams, etc. These will be there for decades. Some house businesses that have products and services that other countries buy for cash.
          The Chinese save 36% of every paycheck. They have a buffer against hard times. Americans have a negative savings rate.
          On the other hand, America issued debt to pay the interest on debt they issued decades ago. America is also paying the Free Shit Army to do nothing. Hundreds of billions of municipal, state, and federal pensions are underfunded underfunded but the obligation to pay is there. That’s the same thing as debt.
          You can’t compare China and America with simple numbers.

        • February 7, 2016 at 11:51 pm

          You wrote: “Americans have a negative savings rate.” It’s time you check the data! Clearly, your anti-Americanism is clouding your judgment.

          Because you’re so wrong on this easy data point (the savings rate is announced monthly, so you should know it), it makes me question ALL the other data you cite. Probably ALL of it is as wrong as your statement about the American savings rate.

          Oh, yes, you forget to mention the ghost cities, the industrial plants that have created nothing but debt and overcapacity…. will you ever take your rose-colored glasses off to look at China? Probably not.

      • Randy
        February 8, 2016 at 11:41 am

        Yes, but what they are “saving” is only some fictitious electronic bookkeeping entries that will just go “POOF!!” when the power goes off due to hyperinflation.
        This is a world wide fiat paper currency financial system we’re living under, and it’s just about ready to come crashing down upon our heads, so we’d better get the heck out from under it while we still can.


  11. Mark
    February 6, 2016 at 11:27 pm

    Mr. Dent was wrong on everything he said for the past 16 years.
    Check youtube and his predictions of gold going $5000 or anything else.
    The guy is brain dead.

  12. MC
    February 7, 2016 at 4:59 am

    The so called Skyscraper Index is built around one very simple premise: during times of economic boom (or bubbles) building skyscrapers makes economic sense as they maximize very expensive land underneath and credit to overcome engineering challenges (which grow exponentially with height) is cheaper. Just to give an example, to build the Kingdom Tower in Jeddah and the Phoenix Towers in Wuhan, a wholly new family of cement pumps had to be developed and custom built just for these jobs by Schwing-Stetter of Germany.

    This latest round of skyscraper fever fits the bill just right with only one exception: the aforementioned Kingdom Tower.
    Jeddah has no lack of dirt cheap land nearby for development (just look at pictures of the building site: it’s in the middle of nowhere) and Saudi Arabia has almost as cheap imported labor. Unions are unheard of there and nobody cares too much about things such as working hours and safety regulations.
    In short the Kingdom Tower makes zero sense even when looked at through the traditional Skyscraper Index lens. It’s a vanity project for the House of Saud and, most likely, a way for them to pay off their political debts.
    In a supreme twist of irony, the Tower is being built by the Bin Laden Group. While this family is better known for its renegade offspring, Osama, the Bin Laden are huge players in Saudi Arabia.
    Osama’s old man, Mohammed, saved the country from bankruptcy under King al-Saud and his heirs have quietly provided the thousands of male and female members of the House of Saud with large sums of money at critical moments: despite the kingdom’s huge oil wealth, the clan has always been known for its extravagant lifestyle and the huge bills it has racked up all over the world. The Royal treasury often flat out refuses to pay these bills so it’s left to rich clans such as the Bin Laden to settle these debts.

    Now: they don’t do it because they are coerced or out of their good heart. They do so because in return the Saudi government will give them contracts. Contracts whose value is often grossly inflated both to pay off these debts and so that members of the ruling clan can skim more than a little off the top (20% is considered the norm these days).

    Like many commodity-producing countries Saudi Arabia has serious problems following the path comprising even a shred of fiscal rectitude. When large cash reserves are built up during periods of high commodity prices, little or nothing is done to attempt modernizing the country and weaning it from its overdependence on oil. This results in cash reserves being burned at a spectacular rate when commodity prices drop, like we are seeing these days: the Saudi may talk as much as they want about budget cuts, but they won’t do anything until they are forced. And why they should? Oil is bound to bounce back sooner or later. If push comes to the shove, the Bin Laden and other rich clans can step in.

    Problem is the age of oil seems to have reached its climax. As a Rosfnet official dryly commented “In the future the world won’t need as much oil as we thought it would”. Whether central banks and governments, with their GDP projections a decade or more into the future, likes to believe in the opposite, the excesses of the past fifteen years will need to trimmed. Bad investments will need to be liquidated. Many Ferrari’s will be repossessed and many oil tankers will be scrapped.
    While everybody seems to want to believe a “crash” is imminent or in the near future, I am more inclined towards a protracted period of cooled economic activity, which will be made worse by the fact all the monetary and fiscal arrows have already been expended. Central banks have nothing more to cut and governments are already running large deficits. Taxes throughout the world are already at (if not past) the apex of the Laffer Curve.
    There may be short bursts of euphoria, but the inevitable laws of economics will win out in the end.

    • Nicko
      February 7, 2016 at 10:32 am

      One thing Saudi has going for them is a cohort of highly educated business managers. Sure many are lazy, but many are also pragmatic with an eye toward the future. The oil rout could have the positive effect of opening up the Saudi economy (much the same as Iran is forced to open their economy). Spinning off a portion of Aramco may be the first step. Gradually removing generous subsidies for their citizens will be the next, delicate step.

    • roddy6667
      February 7, 2016 at 10:12 pm

      China bought Schwing. They also bought Putzmeister. China used more concrete in 3 years than the US did in a century.

  13. JR
    February 7, 2016 at 9:29 am

    An outbreak of the “edifice complex” has long been a reliable indicator of the end of the business/market cycle, and mile high isn’t the only game in town. Someone should warn Tim Cook .

    • chris hauser
      February 8, 2016 at 6:23 pm

      the doughnut.

      babel, tower of. been done.

      yes, spending a lot of dough on a business palace has often been the sign.

  14. Jonathan
    February 7, 2016 at 9:52 am

    The ultimate irony is the wealthy collectively have so much money yet they always can’t go beyond buying yet another boring high-rise building, metal cage on four wheels, or a subsonic passenger jet etc that has already been done to death because they are bankrupt in terms of imagination and vision.

    But then again this is just a mere peasant talking.

  15. frederick
    February 7, 2016 at 12:59 pm

    Nick Kelly how much do they pay you to write such lies buddy

  16. Julian the Apostate
    February 8, 2016 at 12:09 pm

    Keep calm and don’t feed the Trolls

  17. roddy6667
    February 9, 2016 at 4:30 am

    More reporting on America’s negative savings rate

Comments are closed.