Auditors seeking to head off a Chinese crash are rushing to scrutinize the debt-swollen books of the country’s local governments. Economists are poring over statistics, bond spreads, electricity gauges and stock valuations. They might all have more luck if they got their noses out of the books and looked up. 

On July 20, the Broad Group broke ground on Sky City on the outskirts of the south-central city of Changsha. The skyscraper will rise 838 meters (2,749 feet) into the heavens to become the world’s tallest building. If that weren’t feat enough, the project aims to wrap up construction in 90 days and at almost half the cost of Dubai’s Burj Khalifa, which it would top.

Broad Chairman Zhang Yue is building not just a piece of history but also an almost-perfect metaphor for all that’s wrong with China’s economy. If his vanity project were the only indicator available to economists, they would have to conclude that a crisis was nigh.

Of course, no one knows if China is cascading into a crisis ― not even Premier Li Keqiang, who is charged with reining in overcapacity, runaway investment (much of it financed by local governments) and an addiction to exports. This triumvirate once propelled China’s 10-percent-plus growth; now they’re huge anchors dragging the economy down.

Yet the experiences of Japan, Malaysia, the United Arab Emirates and the U.S. show an uncanny correlation between architectural one-upmanship and economic doom. In the 1920s, for example, New York’s Chrysler and Empire State buildings opened amid the Great Depression. Later, New York’s World Trade Center and Chicago’s 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. A decade later, Dubai’s economy hit a wall right on cue as the 828-meter Burj Khalifa was getting its Guinness World Records mention.

Skyscrapers are akin to giant punctuation marks made of steel, glass and concrete, screaming, “Check us out!” More than technological progress, they usually reflect hubris. Exaggerated pride and easy credit ― terrible bedfellows in the best of times ― fuel irrational growth and valuations; they drive developing nations toward overreach. This is precisely where China finds itself in 2013 as the economy’s excesses spark fears about financial turmoil, debt defaults and social instability. China will have to be very lucky to avoid the skyscraper curse.

The Changsha project is a particularly interesting metaphor for China’s economy. The blistering pace at which the building will go up ― more than two stories a day ― raises serious concerns. Broad Group’s claim to fame is prefabricated steel and concrete modules that supposedly make construction cheaper and more ecologically friendly. Last year, it put up a 30-story hotel in just 15 days. Yet how well can a 202-story building that is essentially a giant Lego set withstand earthquakes, extreme wind or fire?

China, too, has grown with seemingly impossible rapidity. But fast and cheap growth doesn’t mean China has created a stable, efficient or diverse economy. That has become especially apparent since 2008, when Beijing nimbly steered around the global crisis. It only did so by doubling down on credit excesses that it’s now having trouble controlling ― including asset bubbles and the surge in local-government debt.

China’s impatience in building its economy, for example, has left little time for developing indigenous corporate brands. Instead, the state is more interested in buying established overseas businesses and demanding technology transfers as the price of access to the Chinese market. The trouble with skipping some of the development steps is that occasionally one trips.

Li and other Chinese leaders should be trying to set themselves apart from blustery tycoons like Zhang. The Broad Group is in a tug of war with the mainland news media amid reports that the company hasn’t received proper approval for Sky City; the company insists it has. Broad Group is also sparring with skeptical architects demanding to know more about its dubious-sounding construction plans.

Yet Beijing’s reform blueprints also are causing considerable confusion. One moment, the news reports that Li is pulling building permits for government and Communist Party agencies; the next it details how Beijing plans to provide fresh stimulus to keep growth above 7 percent.

Li’s pledges to support the economy are directly at odds with his vow to tolerate slower gross domestic product growth. This doublespeak suggests Li and President Xi Jinping are making up their blueprint for retooling the economy as they go along. 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 sounds great on paper but near impossible in practice.

Let’s hope history doesn’t prove this to be a towering display of denial on the part of China’s leaders. Even if you doubt that a nation’s skyline says anything about the state of its economy, worries that China is heading into a turbulent period are based on pretty solid foundations. 

By William Pesek

William Pesek is a Bloomberg View columnist. ― Ed.

(Bloomberg)