It seems that the much-vaunted Chinese economic miracle may contain a considerable amount of commodity and credit fraud:
Chinese authorities are investigating a number of cases in which steel documented in receipts was either not there, belonged to another company or had been pledged as collateral to multiple lenders, industry sources said. [...] "The situation will get worse as poor demand, slumping prices and tight credit from banks create a domino effect on the industry."In the rush to boost balance sheets, it seems that the Chinese banks and companies have not been as careful about loan collateral as they might have been. As a result, the steel collateral for loans either never existed, or is pledged to multiple creditors. Oopsie. Anyone want to bet against this situation being replicated across the entire economy? Steel prices, after all, are at a three year low - if this is the fraud being perpetrated with steel, what's going on with more valuable assets? What about paper assets, which are the easiest to forge?
The Chinese government clearly has no interest in exposing this fraudulent activity, unless it's a public execution of the business executives responsible as in the melamine contamination of baby milk. Eventually the fraud is going to reach a point where no-one with any common sense is going to do business with Chinese firms - or the Chinese government, which by that point will be indistinguishable from another commercial enterprise.