ABSTRACT
Corruption has become a major enemy of economic development and social stability in China, and has caused prodigious economic costs for the country and its people. The estimate of economic costs resulting from corruption is very difficult. Corruption is often called a “black hole,” which is an invisible abyss. It is necessary to know, during the transformation period of the Chinese economy, which areas and departments are the most corrupt, why they are easily corrupted, how to determine the key areas for preventing corruption, and in what areas the anti-corruption measures can effectively reduce economic costs. To answer these questions, we have to make a preliminary estimate of the economic costs of corruption, however crude and inaccurate it might be. According to my calculation of four major types of corruption during the economic transformation period in China (i.e. corruption in rent-seeking, the underground economy, evasion of taxes, and government investments and public expenditure) in September 2000, during the late 1990s, just these four major types of corruption each year have on average resulted in economic costs of about 13.3 to 16.9 percent of GDP.2
