William Pesek is an award-winning Tokyo-based journalist and author of "Japanization: What the World Can Learn from Japan's Lost Decades."
The best indicator of whether President Xi Jinping really is reducing leverage in Asia's biggest economy might not be data. It may be the skylines of China's biggest cities.
As China sets the pace for recovery from COVID-19, Beijing claims to be wringing froth out of asset markets, policing shadow-banking entities and taming local government debt. It is quite a feat as much of the globe churns out more stimulus amid fresh lockdowns and panic over the delta variant.
Last week, China demonstrated its effort to strike a balance. The People's Bank of China cut the amount of cash banks must hold as reserves by 0.5 percentage points, aiming to jolt lending activity -- but not too much.
Elsewhere, indications are that Xi might finally mean business on deleveraging. Case in point: a new ban on "super skyscrapers," generally defined as structures higher than 500 meters, and fewer approvals for buildings higher than 250 meters.
This move is interesting on a couple of levels. Super skyscrapers have kind of been China's brand these past 20 years. Roughly half of the globe's 100 tallest buildings are there. Across the nation, cities enthusiastically practiced architectural one-upmanship. Hosting the world's tallest towers sure put Kuala Lumpur on the radar screen. Why not repeat that trick in Hebei, Shenyang, Tianjin and elsewhere?
However, the real point is what this says about Xi's determination to change incentives driving the runaway credit that imperils China's future.
Do not downplay the symbolism. History suggests a bizarrely tight correlation between efforts to build the world's tallest buildings and financial crises. The likely reason: Giant construction projects are often just bricks-and-mortar manifestations of financial hubris and credit growth run amok.
Dismiss the link, if you wish. Hey, coincidences happen -- even very tall ones. But the evidence of the past 114 years is worth considering, argue economists like Mark Thornton, author of the 2018 book "The Skyscraper Curse."
Let us start with the 1907-1908 New York City construction of the 47-story Singer Building and the 50-story Metropolitan Life Building. That period became synonymous with panic thanks to a nearly 50% plunge in stocks. The run on banks got so bad that financier J.P. Morgan had to lead an effort to shore up corporate America.
Years later, around 1929, celebrations over the soon-to-open 40 Wall Street and the Chrysler Building were short-lived as the New York Stock Exchange crashed. The arrival in 1931 of the 102-story Empire State Building seemed to add insult to injury as the Great Depression did its worst.
Fast-forward to the early 1970s, when New York's World Trade Center and Chicago's Sears Tower had the folks at Guinness World Records busy revising the skyscraper tables. Those new structures coincided with runaway inflation, fiscal crises in America's biggest cities and the breakdown of the Bretton Woods monetary system.
In the 1990s, it was Asia reaching for the heavens. The 1997-1998 Asian financial crisis came just as the twin Petronas Towers were being completed in Malaysia's business capital.
The early 2000s saw Taiwan grab the title with the 509-meter-tall Taipei 101. Perhaps it is just a coincidence that its 2004 christening dovetailed with a surge in tensions with China that continue to boil over today.
Four years later, finishing touches were being put on Dubai's 829-meter Burj Khalifa Tower just as Wall Street's 2008-2009 subprime reckoning shook the world economy. The resulting volatility in oil prices hit the Middle East hard and lastingly.
China is now the epicenter of architectural marvels gunning for the record books. In 2015, Shanghai Tower, the globe's tallest twisted building, was completed just as Chinese stocks were plummeting. In summer 2015, a 30% drop in Shanghai bourses in just a few weeks had the government switching off trading for days at a time and suspending initial public offerings.
The 2017 opening of Shenzhen's Ping An Finance Center, then the fourth-tallest building, coincided with the start of U.S. President Donald Trump's trade war with China. Fun fact: Since 1995, Trump has held the lease on 40 Wall Street, the structure opened amid the Depression.
Now, of course, China is rethinking the super skyscraper arms race. At the moment, five of 10 buildings that exceed 500 meters are on the mainland.
In part, the ban is about safety. In May, authorities shut down a 72-story tower in Shenzhen amid unexplained wobbling. It stands as a very tall metaphor for China's penchant for speed -- and for prioritizing the quality of economic growth over quality.
Yet China's architectural crackdown also seems aimed at accelerating Xi's deleveraging push. Beijing's decree appears to be recognition that the impulse to build higher and higher is driven by supercharged monetary excess even more than advances in engineering technology. More often than not, supertall buildings have been the top tick, literally, of boom-bust cycles.
Can China beat the skyscraper curse? Admittedly, its survived 2015 and 2017 brushes with tower-related doom. Xi's Communist Party bent the internet, World Trade Organization norms, and capitalism's tenets to its own will. It is certainly possible it can avoid the Minsky moment, or when a credit-fueled boom ends badly, that confronts every other nation.
Either way, Beijing's ban on over-the-top skyscrapers, and the overlapping excesses behind them, could be a sign that Xi really is stabilizing China's foundations.