Corruption is thriving in China, this tends to weaken transparency and bring into question how much faith you should have in its government. In Shanghai and Beijing, where big corruption scandals involving top officials it becomes clear just how bad things have become. Still it appears that China’s leaders are in no mood for serious reform. While it has not yet derailed China’s economic rise, sparked a social revolution, or deterred Western investors, it would be foolish to conclude that the Chinese system has an infinite capacity to absorb the mounting costs of corruption.
With ghost cities, and a banking system that can not be trusted, I content that the reason that inflation is easing in China may be the result of domestic demand waning. This could be the first signs of a hard landing. As China continues to produce funny, fuzzy, and flimsy numbers the world will begin to question and eventually lose faith in its flawed system. We may now be seeing the first cracks are beginning to show. More about this subject below,