How the world’s tallest building got grounded in China by Scott Cendrowski @FortuneMagazine July 9, 2015, 8:23 AM EDT E-mail Tweet Facebook Linkedin Share icons On a sweltering afternoon in July 2013, in the city of Changsha—home to 8 million people, but little known to anyone not Chinese—a hometown company called Broad Group broke ground on what it promised would become the world’s tallest tower. The lead of CNN’s report read like a provocation: “Dubai’s 828-meter Burj Khalifa has less than a year left as the world’s tallest building.” Sky City, as Broad called it, was to be a 202-story glass giant that ascended in tiers like a wedding cake. It would not only top the Dubai tower by 10 meters, but would do so in just seven months, using a special construction method that assembled prefabricated pieces of steel as if they were Legos. (It had taken laborers six years to build the Burj Khalifa.) The man behind the promise was Broad’s founder, Zhang Yue, a dashing business leader with a record of success and a flair for the dramatic. In the 1990s, Zhang was one of China’s first minted billionaires, and the first to buy a private jet. He was also one of China’s biggest names in green technology, having gotten rich by selling efficient air chillers worldwide. Since the late 2000s, he had been designing eco-friendly buildings, and he had proven he could build them quickly: In 2011, Broad erected a 30-story building in just 15 days. An artist’s rendering of Sky City, the eco-friendly, 202-story skyscraper designed by the Broad Group. Courtesy of the Broad Group By 2013, China was building 60 of the world’s 100 tallest buildings under construction, a pace that dotted its skylines with construction cranes even in far-flung metropolises that didn’t seem to have an economic need for skyscraping towers. But Sky City would outdo them all. On paper, it was one of the most innovative construction projects in the world. Behind its design was an ambitious plan to dramatically reduce emissions by creating a city-within-a-city for 30,000 residents. The rectangular tower would house a hospital, a school, shopping centers, grocery stores, even a running track that spiraled upwards for 170 stories. Broad said Sky City would take 2,000 cars off the road and cut carbon dioxide emissions by 12,000 metric tons a year—about the annual electricity usage of 1,600 U.S. homes. Zhang imagined a tower that no one would need to leave. News of the groundbreaking ran in newspapers and blogs around the globe. But the triumphant follow-up hasn’t materialized. Construction on Sky City’s foundation stalled. Stories of intrigue circulated; local Chinese news reported permitting problems, government delays, and safety fears. Zhang eventually stopped talking publicly about when the project would be finished. Today, two years later, as other Chinese towers begun in the summer of 2013 near completion, Sky City remains a dream and a patch of dirt. What went wrong? How did Zhang, so successful over the previous quarter-century, so badly misjudge government regulators? And what does it say about China’s economic future that a project of major significance—and a potential solution to the country’s overcrowding and pollution woes—has been stymied so easily? Broad Group’s headquarters are located on a 250-acre campus on the outskirts of Changsha, called “Broad Town”—easily the most unusual corporate home base in China. Twelve hundred employees live and work here. There are 43 life-size bronze statues scattered across the grounds, chosen by Zhang himself, including depictions of Aristotle, Abe Lincoln, Charles Darwin, and the Wright Brothers, who greet viewers with outstretched arms. On one end of “town” stands a replica of an Egyptian pyramid; across from it is a management meeting hall resembling the Palace of Versailles. (The writer James Fallows spotted the pyramid while flying across China and wrote, “There are things both admirable and creepy about this utopia.”) An aerial view of ‘Broad Town,’ the Broad Group’s corporate headquarters, including its replica of an Egyptian pyramid (far left) and its meeting hall modeled after Versailles (center). (Click photo to enlarge.) Courtesy of The Broad Group Meals in Broad Town are free three times a day, as is lodging, as long as Zhang’s edicts are followed. Once you’re hired, you wear the same outfits as everyone else (blue slacks and white shirt for white-collar employees; an electric-blue jumper for factory workers). Workers must rise every Monday for a 7:45 a.m. flag-raising ceremony, and adopt the company culture, which means following more edicts, including a rule that bars workers from the canteen for two days and posts their pictures on a shame wall if they leave food on their plates. Some critics have called Zhang’s approached cultish, but there’s no doubt it has produced successful businesses. Zhang studied art in college and worked as an interior designer before joining his brother Jian, an engineer, in business selling boilers. They later patented a non-electric air chiller with a distinctive design: instead of using Freon like a typical air-conditioner, it relies on a natural gas flame or another heat source to expand a gas solution that cools air. The design became known as a marvel of energy efficiency: Broad now sells systems to customers in 80 countries, including the Department of Energy in Washington, D.C., Qualcomm’s headquarters in San Diego, and the Bowery Hotel in Manhattan. The air-chiller business is responsible for almost all Broad Group’s more than $1 billion in annual revenues. Living under the polluted skies of Changsha, Zhang had a further green awakening in the 2000s, selling his private jet and urging other billionaires to do the same. He adopted a new calling after the devastating 2008 earthquake in China’s mountainous Sichuan province. In that catastrophe, 6.5 million buildings fell, including poorly constructed schools and concrete apartment complexes, killing 90,000 people. Zhang set out to design buildings that could not only withstand a major earthquake, but would be cheap to build and efficient to run. Today a new division of the Broad Group, called Broad Sustainable Buildings (BSB), prefabricates big steel pods, 16 meters wide, which it later assembles on-site atop traditional concrete foundations. In testing, a scale version of its design survived a magnitude-9 earthquake, the highest-intensity earthquake known. But BSB’s promotional video declares, unflinchingly, “We created an even bigger miracle.” The buildings use Broad’s air-chilling technology, as well as thicker insulation, triple-paned glass, and power-generating elevators, and BSB says they are five times as energy-efficient as the typical Chinese tower. The United Nations recognized Zhang’s innovations, awarding him a “Champions of the Earth” prize in 2011. Zhang notes that honor on his business card—which is half the height of a normal one, to save paper. Zhang believed that by introducing this technology on the grandest possible scale, Sky City would change the way buildings were constructed in China. He told an interviewer in 2013, “Don’t be surprised that if we have annual sales income of 100 billion yuan [$16 billion] or even 1,000 billion.” Workers at the Sky City groundbreaking ceremony in July 2013.Photograph by Chi tu – Imaginechina Zhang was setting expectations that would be high for any new business—especially one whose core technology wasn’t yet approved by regulators. Pictures of Zhang from a few years ago show him wearing Western suits and sporting slicked-back, jet-black hair, projecting the self-confidence typical of Chinese tycoons who rose during the roaring economy of the 1990s and early 2000s. Today, Zhang’s hair has turned gray and unkempt. On the occasion of a recent interview in his office, Zhang wore loose black slacks, sandals, and a billowing white dress shirt that flapped at the unbuttoned wrists when he gestures. “We need to use the best technology now in buildings,” he says as soon as I sit down, launching into an impassioned monologue about how building methods haven’t changed since the Empire State Building was completed in 1931, and noting that buildings account for almost two-thirds of the world’s pollution. “We have high-tech trains, but not high-tech buildings,” he says. Zhang, who stands maybe 5’5”, momentarily dips out of sight behind stacks of papers on his desk. Returning, he fiddles with a set of tiny, magnetic cubes, crafting them into the shape of little towers. He looks like a man who hasn’t had much sleep. It’s not just building designs Zhang talks about revolutionizing; he wants to change the way people live. In China, American-style suburban sprawl simply isn’t possible, given the scarcity of land. “Thirty stories is not enough!” he exclaims, now pacing his office. That’s why Sky City was designed with 202 stories, he explains. Regulators, apparently, didn’t sympathize. Just four days after the July 2013 groundbreaking, China’s official state-run news agency, Xinhua, appeared to confirm a rumor that had bubbled in local media for days: Sky City didn’t have the proper permits. A critic of the project, Yin Zhi, head of the urban design institute at Beijing’s Tsinghua University, scoffed at the project. “The technique that Broad Group uses has no precedent in the world, and the cost they promised is very low ($1.5 billion),” he told Xinhua. “So they either have some record-breaking techniques or it’s a lie.” Since China has long used Xinhua to relay top officials’ thinking to cadres in the provinces, Yin’s critique resonated: It was a sign that top leaders either didn’t trust Zhang’s techniques, or didn’t want to expose those methods to the scrutiny that would come with construction of the world’s tallest building. When I ask Zhang about the earlier stories and criticism, he stops me, saying in Chinese, “One word: it passed.” But Zhang’s answer is only half the story. The China Academy of Building Research, which regulates the country’s tall towers, did initially approve Sky City’s plan and design, contingent on small changes, an official there confirmed to Fortune. But the official, who said he wasn’t authorized to be quoted in the media, said approvals in China follow a three-step process. Sky City passed the first two—plan and design—but not the third: the construction plan. Provincial regulators in Hunan, Changsha’s province, were in charge of that; they moved considerably slower than their Beijing counterparts, probably because they were skeptical about the structure and science behind it, and the process dragged on for months. Duan Xingang, survey and design division researcher for Hunan’s provincial bureau of housing and urban-rural construction, told Fortune the first of his group’s approvals only came in April 2014. He didn’t explain the delays, and hung up when asked for more information: “Don’t call me,” he said. Today, it seems clear that provincial regulators were in over their heads with Sky City. Beijing and Shanghai have many such towers taller than 250 meters, and regulators there have experience in the high-stakes game of approving super-tall buildings. Hunan province has no such buildings, yet Zhang was asking Hunan officials to endorse, quickly, a global first: a prefabricated tower rising more than 2,000 feet into the clouds, to be occupied by 30,000 residents. Any design flaw missed by regulators could have become a 202-story black eye for China. It’s also possible that provincial cadres worried about broader political winds. Since President Xi Jinping took office in late 2012, a clampdown on corruption has been associated with real estate and regulatory approvals in striving cities like Changsha. By mid-2013, another Communist Party organ, the People’s Daily newspaper, was concluding that “Vain local government officials” were creating an overheated construction market. In total, Broad Group has spent $600 million on research and development for the technology used in Sky City and its other buildings. “It’s everything we have,” says Zhang. He says Broad Group is safe financially, despite the heavy investment. But Zhang is obviously frustrated there’s no timetable when the R&D spending will start translating into income. “It is the same procedures, same permits, the same local problems. The government hasn’t realized there are different building methods,” he says, stomping around his office. “They treat us exactly like migrant workers.” Broad Group chairman Zhang Yue at the Sky City groundbreaking ceremony. Photograph by Chi tu — Imaginechina/AP By 2014, Sky City had run into other problems. Two investors who joined Broad Group in funding the $1.5 billion project had pulled out, rattled by negative stories and mounting permit delays. The relationship between Zhang and regulators may yet improve—Daniel Safarik, director of the Council on Tall Buildings’ China office, says skyscraper construction is still healthy in China in general. But for now, Sky City is shelved until Broad can find new financial partners. Two years after proclaiming that BSB’s revenues could grow to $160 billion, Zhang sounds more circumspect. “It’s hard to tell,” he says, about the business’s growth prospects. “We haven’t earned any money yet.” This spring, Broad proved Sky City could be built, at least in a much scaled-down form. Mini-Sky City is a 57-story mixed-use complex that was assembled in 19 days this spring on Broad Town’s campus, as shown in a time-lapse YouTube video. Floors one through nine are commercial spaces. The rest are apartments ranging from 60 to 300 square meters. More than 1,000 workers are now finishing the interior touches before an August move-in date. The floors of the building have the feel of an experimental commune. There are open atriums three stories tall in the middle section. A walking track runs next to them, spiraling upwards through the interior of the building from ground to top; the angle is just steep enough for your calves to burn after a few stories. Broad has already hosted a bike race on it called “Reach for the Sky.” But there are indications not everything has gone as planned. Inside one bank of elevators, the floor buttons rise to 62. The Hunan provincial government had originally approved a 97-story tower: When the building-in-progress was 11 stories tall, China’s airline commission ordered construction stopped, explaining that too many flights would have to change their routes because of the building’s proximity to the airport. After negotiations, Broad announced it would cut the building by forty stories—another blow to Zhang’s ambitions. Zhang says that, despite the height reduction Mini-Sky City accomplishes his goal: It shows families how to alter the way they live in ways that are more sustainable for China and the world. But Zhang’s bigger goals—the full-sized Sky City, and all the trials and exposure that would come with building the world’s highest tower—remain only a dream for now.