The Great Wall; Forget the rampaging growth numbers. China today looks much like Japan in the 1970s: about to slam into reality.

Byline: Ruchir Sharma (Sharma is co-head of global emerging markets at Morgan Stanley Investment Management.)

Smart investors don't like tall buildings. Too often a country has announced a plan to build the world's highest structure in the midst of an economic boom, typically marking the heady peak of an investment cycle. Understandably, then, there was some concern recently when officials in the southern Chinese boomtown of Guang-zhou said they were aiming for the record books with plans to construct the world's tallest tower.

The announcement underscores the point that China is experiencing the most staggering investment boom in recorded history. There have been other growth miracles over the past century, with Japan, South Korea and Taiwan all registering similar increases in GDP over a 25-year period as China has done since 1978. But the scale of investment in China is unprecedented, with fixed investments now making up nearly half of GDP. (Among the other miracle economies, the high was 39 percent in 1991 by South Korea.) It's all there to be seen, with 40 new airport terminals coming into operation over the past three years and a quarter of the world's cranes now working on Chinese cities.

The fixed-investment frenzy has altered many equations in the global marketplace. China has become the largest consumer of many commodities, and the oil shock of the past year can be largely attributed to a "demand shock" from that country. The unexpectedly high Chinese demand also explains why the global economy has been remarkably resilient to the surge in crude prices. Both the price of oil and global economic growth have been reacting to the same dynamic--China's strong growth.

China has been the largest contributor to global economic growth over the past five years in terms of purchasing-power parity (that is, adjusted for China's under--valued currency). In fact, proxies for GDP growth, such as electricity consumption, suggest GDP growth probably averaged 11 to 12 percent over the past year. All this, however, seems unsustainable when put in a historical context.

In the late 1960s, when Japan's per capita income level crossed the $1,000 threshold, as China's did last year, its growth rate began to shift to a lower trajectory. In the early phases of development, the most powerful driver of growth is "convergence," when reforms have a disproportionately large effect in spurring growth due to the low starting base and a high degree of inefficiency in the system. Reforms have led to a productivity boom in China over the past two decades, but the country has consumed a lot more capital than Japan ever did. While China pessimists are an endangered species these days, the few survivors continue to warn that too much money is chasing the China story without getting a reasonable return.

The hot money lands in the People's Bank of China, which has been accumulating foreign-exchange reserves at a frightening pace of $10 billion a month over the past two years. The question is whether China will continue to rewrite the laws of development economics, or is about to enter a more mature growth phase, as Japan did in the 1970s.