Corruption Eats Away at China's Growth

China's remarkable economic boom captures all the headlines. But there are termites chewing into the foundation of China's growth—the endemic corruption that is one of the most serious threats to the nation's future economic and political stability. That's the conclusion of the new report "Corruption Threatens China's Future" by Minxin Pei, a China expert at the Carnegie Endowment for International Peace in Washington. He estimates that roughly 10 percent of government spending, contracts, and other transactions goes to kickbacks or bribes or is simply stolen.

The direct costs of corruption? As much as $86 billion a year, the report estimates. It contributes to social unrest—sparking thousands of protests a year—and contributes to environmental and health problems. Still, he finds, "the odds of a corrupt official going to jail are less than 3 percent, making corruption a high-return, low-risk activity."

This is not just China's problem, the report adds, since it "also harms western economic interests, particularly foreign investors who risk environmental, human rights, and financial liabilities and must compete against rivals who engage in illegal practices to win business in China."

U.S. News recently reported on the influence of corruption in the preparations for next year's Olympics in China in a story called "Olympic Greed."

—Terry Atlas