Salient to Investors:

William Pesek writes:

Concerns that China is heading into a turbulent period are soundly based. No one knows if China is cascading into a crisis, not even Premier Li Keqiang.

In July, the Broad Group broke ground on the world’s tallest building, expecting to build it in 90 days at half the cost of Dubai’s Burj Khalifa. An almost-perfect metaphor for all that’s wrong with China’s economy.

In the 1920s, the Chrysler and Empire State buildings opened amid the Great Depression. The World Trade Center and Sears Tower presaged fiscal crises and the breakdown of the Bretton Woods system.  In the late 1990s, Kuala Lumpur’s Petronas Towers opened at the height of the Asian crisis, and in the 2000s, Dubai’s economy hit a wall as the Burj Khalifa took over the mantle.

Skyscrapers usually reflect hubris more than technological progress. Exaggerated pride and easy credit fuel irrational growth and valuations. China will have to be very lucky to avoid the skyscraper curse.

Fast and cheap growth does not mean China has created a stable, efficient or diverse economy. China steered around the global crisis only by doubling down on credit excesses, and is more interested in buying established overseas businesses and demanding technology transfers as the price of access to the Chinese market.

Li’s pledges to support the economy are directly at odds with his vow to tolerate slower GDP growth. The contention that they can cut excess capacity, clamp down on credit and create a domestic demand-led economy while avoiding a sharp drop in growth is near impossible to implement.

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