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China banks: Ticking time bomb?

A new report by Fitch warns of a coming crisis.
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Buildings topple from a controlled-explosion set off during their demolition in the Huanggang district of Shenzhen, May 22, 2005.

Unrest across the Middle East. Surging oil prices. Persistenly high U.S. unemployment.

What else could derail the global economy?

How about a banking crisis in China?

Fitch Ratings says there's a 60 percent chance of that happening by mid-2013.

The toxic financial combination in China, according to Fitch: surging property prices (see, in particular, Shanghai), and a record amount of lending over the past two years ($2.7 trillion) fuled in part by the Chinese government's stimulus program Beijing enacted during the global economic crisis.

Fitch sees the risk of “holes in bank balance sheets” should a property bubble burst, Richard Fox, a London-based senior director, told Bloomberg on Mar. 4. “We’re talking about systemic crises here, affecting most of the major banks,” Fox added. “A crisis is something which technically de-capitalizes the banking system.”

This isn't the first time Fitch has warned of trouble ahead in China.

As reported by GlobalPost's David Case, Fitch first pointed to the problem in December:

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Oil's spike: Sunni v. Shia

Why this turmoil may go on, and on.
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Bahraini Shiite opposition leader Hassan Mashaima, left, greets anti-government protesters gathered at Pearl Square in Manama on February 26, 2011 upon his return from self-imposed exile following assurances from the Gulf kingdom that he had been pardoned of terrorism-related charges. Bahrain's protests put it at the center of the bitter divide between Sunnis and Shias in the Gulf. (Joseph Eid/AFP/Getty Images)

Here's a great recipe for higher oil prices:

Take a volatile situation (Tunisia, Egypt, Libya, etc.). Toss in the power of social media. Add non-stop media coverage. And, for that extra kick, mix with a generous dollop of religious division.

That's what we're seeing now on global oil markets, according to David Kotok, courtesy of the ever-smart and always entertaining Business Insider.

In today's piece Kotok — chairman and chief investment officer of Cumberland Advisors — makes this salient historical point about rising oil prices:

"One needs to put this MENA (Middle East North Africa) contagion into the millennium old perspective of the Shia-Sunni schism in Islam. Discussion of that is beyond this short missive. But we must note that Iran is now the dominant sponsor of Shiite Islam and Saudi Arabia is the keeper of Sunni tradition. Readers and serious investors are encouraged to study this schism. Think about it as you think about Catholics vs. Protestants or the War of the Roses. Put that type of historical enmity into an Islamic setting. No way is this over."

This Sunni-Shia divide is popping up most clearly in unstable Bahrain, as GlobalPost's Caryle Murphy reported on Feb. 26.

The tiny island state has been hit by weeks of protests by its largely Shia population.

Here's how Caryle explains it:

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U.N. Security Council adopts arms embargo against Libya (UPDATES) (VIDEO)

In Benghazi, GlobalPost's Nichole Sobecki reported that opposition had been largely successful in maintaining law and order, and the only gunfire on the streets appeared to be celebratory.

T. Boone Pickens doubts Saudi Arabia can stabilize oil prices

“We’ve got to be crazy to bet on Saudi Arabia for everything.” 

Amid revolt, Gaddafi offers pay raises and bonuses

Can a dictator buy his way out of trouble?
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A Tunisian woman holds a picture showing a rope and a portrait of Muammar Gaddafi during a protest in front of the Libyan embassy in Tunis on Feb. 22, 2011. (Fethi Belaid/AFP/Getty Images)

Extreme circumstances call for extreme measures.

If you're Muammar Gaddifi today, that means money. Lots of money.

Gaddafi's embattled regime has promised to double some public sector workers' wages. It's also vowing a $400 bonus for every family in Libya.

The move is akin to King Abdullah's payout in Saudia Arabia announced earlier this week, where the king offered $10.7 billion in economic benefits designed to help unemployed workers and tame rising inflation.

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Libya: Anti-Gaddafi forces surround Tripoli; more cities fall (UPDATES) (VIDEO)

In some towns, there was no sign of police or military and the town was controlled by "popular committees" armed with automatic weapons.

Report: Gaddafi to sabotage oil wells

A desperate move by a desperate leader?

The situation in Libya is unraveling, and it may be about to get even worse.

According to Time's Robert Baer, a Gaddfi insider says the embattled Libyan leader has ordered the destruction of oil facilities, the source of 95 percent of the country's export earnings:

Gaddafi has ordered security services to start sabotaging oil facilities. They will start by blowing up several oil pipelines, cutting off flow to Mediterranean ports. The sabotage, according to the insider, is meant to serve as a message to Libya's rebellious tribes: It's either me or chaos.

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Too crude

Brazil nearing limit of its oil refining capacity

Using stark language yesterday, the CEO of the state-run oil giant Petrobras said Brazil is fast approaching the limit of its capacity to refine crude oil, adding that the country must boost its refineries, stat.

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Gaddafi wants to "die a martyr" in Libya; UN security meets (UPDATES) (VIDEO)

GlobalPost's Jon Jensen reports from the Libya-Egypt border. "Everybody inside Libya has a gun. It's completely lawless," one Egyptian returnee told him.

Iranian warships enter Suez Canal for first time since Islamic Revolution (UPDATES) (VIDEO)

Crossing the 120-mile waterway, which carries about 2.5 percent of world oil output, usually takes 10 to 12 hours.
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