'Highest' building defies China
bubble By Brendan O'Reilly
China's Broad Sustainable Building (BSB),
a construction company based in Changsha,
provincial capital of Hunan, has announced its
intention to construct the world's tallest
man-made structure. The company's proposed
220-story "Sky City One" in Changsha would be 828
meters high - ten meters taller than Dubai's Burj
Khalifa. What is more, BSB claims the entire
structure could be assembled in 90 days - between
November 2012 and January 2013.
Sky City
One exemplifies both the positive and the negative
aspects of China's current economic situation.
China's economy relies on an impressive ability to
construct massive projects quickly, and with
relatively low costs. On the other hand, the
singular obsession with construction and real
estate reveals the
weak side of China's
economic engine, especially as the housing market
continues to show signs of a slowdown.
BSB
claims that the actual construction of Sky City
One may take only three months. This is not
necessarily an overenthusiastic boast. BSB has
already built a 30-story hotel in 15 days. The key
to BSB's ability to construct buildings at such
impressive speed is the use of prefabricated
materials. According to a company spokesperson,
95% of Sky City One will be manufactured offsite
before ground is broken at Sky City's location.
[1]
Not only is Sky City One scheduled to
be built at breakneck speed; it is also going to
be built on a low budget. The estimated cost of
the world's newest tallest building, with 1.61
million square meters in total floor space, is
only $628 million - less than half of the Burj
Khalifa's US$1.5 billion price tag.
The
good Sky City One is a perfect microcosm of
the three most obvious strengths of China's
economic engine: the ability to create massive
projects, the capacity for rapid execution, and
low costs. Construction cranes are a
ubiquitous sight in urban China. Massive apartment
buildings, shopping malls, and factories are
constantly opening their doors. In the past
decade, 35 square kilometers of shopping centers
have been built or are currently under
construction. [2]
Besides these myriad
private developments, there has been an enormous
investment in public works. The speed at which
some of these projects have been implemented is
nothing short of remarkable. China began
construction of high-speed rail lines in 2005; by
2013 China will have more serviceable kilometers
of such lines than the rest of the world combined.
It is important to note that China's
breakneck growth over the past three decades has
relied heavily on the relatively low cost of
Chinese labor. However, as the cost of labor
rises, the Chinese economy still has an edge due
to its contemporary position as the world's
manufacturing center. It is much more
cost-efficient to open new factories in areas
where many factories already exist, due to the
presence of parts suppliers and existing
transportation infrastructure.
Sky City
One also exemplifies China's push to develop its
interior. The world's tallest man-made structure
is scheduled to be constructed not in Beijing,
Shanghai, or Guangzhou, but rather in unheralded
Changsha, home to BSB's headquarters and ranking
around 30th among China's most populated cities.
That Sky City is planned for Changsha is
symbolic of the central government's deliberate
policy to increase investment and economic
opportunities in inland provinces such as
Changhsa's Hunan, which have lagged economically
compared with coastal regions - Hunan's per capita
gross domestic product is less than half that of
coastal Zhejiang, the country's richest province.
The bad A conspicuously negative
aspect of China's contemporary economy is also
exemplified by the Sky City proposal. Most of the
building's floors are set aside for housing up to
174,000 individuals, while many experts believe
that China is still skirting a significant
real-estate bubble. Average home prices soared
300% between 2005 and 2009. [3] The central
government, fearing a burst, has taken measures to
deflate the sector, including heavy taxes on
second-home ownership, and higher mortgages and
down payments on homes.
As building
continues apace, prices are dropping in most major
cities. New housing prices reached a sixteen-month
low in May 2012. Hardest hit has been Wenzhou, in
Zhejiang province, where prices are down 14% from
a year ago.
Part of the cause for the
rapid rise in housing prices has been a conflict
of interest between the national and local
governments. The national leadership values social
and political stability, and fears the
unpredictable effects of a housing bubble. Local
governments, on the other hand, receive roughly
30% of their revenue from long-term leases to
developers. [4] As the real-estate market faces a
correction on the national level, some local
governments have taken the initiative to stimulate
the local market through tax breaks.
The
Sky City project has received local government and
now must wait on the nod from the national
authorities.
Broad's
vision Although the positive and negative
aspects the Sky City proposal are indicative of
the overall condition of China's economy, the
company that plans to carry out the project is
anything but typical. BSB is a curious outlier in
the crowded field of ambitious Chinese
corporations.
BSB is the construction
subsidiary of Broad Group, a company founded in
1988 by Zhang Yue with an initial investment of
about $3,000 to design and manufacture safe
industrial boilers. Big success came by making
energy-efficient absorption chillers, which use a
local heat source such as natural gas, instead of
relying on the electric grid.
Broad Group
has a stated commitment to environmental
protection. According to company literature:
"BROAD Group is an enterprise based on the vision
of unique technologies and the philosophy of
preserving life. All BROAD products and services
have essentially optimized human life and the
environment of the earth."
This lofty
claim is not entirely excessive. The company's
absorption chillers are relatively environmentally
friendly compared with more traditional
compression coolers. In the early 2000s, Broad
Group refused to manufacture these (despite a
potential for huge profits) because of the
negative impact of compression cooling systems on
the environment. [5] Last year, the United Nations
Environmental Programme (UNEP) awarded Zhang Yue
its "Champions of the Earth" reward.
A
UNEP report on the devastating 2008 Sichuan
earthquake specifically praised Broad Group's
commitment to safe and sustainable design (its
buildings are planned to withstand 9.0 magnitude
earthquakes): "Once it is finalized, a modular,
earthquake-resistant and environmentally friendly
structure such as the one developed by Broad Air
is expected to have a significant international
potential."[6]
Broad Group is not only
distinct in its environmental commitment - there
are some potentially unsettling aspects to the
company. Its "Broad Town" headquarters boasts a
40-meter tall Egyptian-style pyramid. New
employees are put through a military-style "boot
camp" for 10 days to promote discipline and
instill company values. [7]
Regardless of
the idiosyncrasies of Broad Group, its ambitions
are indicative of China's economic promise and
peril. Sky City will rely on China's economic
strengths while at the same time being
particularly vulnerable to potential economic
weakness. The project may be a singularly
impressive engineering feat, but its long-term
economic success depends on the ability for China
to deflate its housing bubble without harming
other sectors of the economy and avoiding a
catastrophic burst.
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