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Serious fiscal turmoil in China can bring the world economies to its knees
China is about to go through a major fiscal challenge in the next few years. The Western nations are pushing for flexible Chinese currency instead of pegging the same to US Dollar. China is importing record amount of crude oil payable in foreign currency. China is also encountering largest Banking corruption and unproductive state owned enterprises that feed on the savings of common people.
China needs to move "without delay" to reform its currency system, U.S. Treasury Secretary John Snow said May 26.
China paid $4.66 billion in April 2005 to import oil, an increase of 86 percent over April 2004, China's Customs General Administration said May 26.
China's central bank said May 26 that it will maintain the stability of the yuan and continue to gradually reform its exchange rate mechanism. The People's Bank of China first-quarter monetary policy report restates the Chinese government's commitment to currency adjustment.
What all these news snapshots point to is a growing critical crisis for the Chinese Banks. China will have to correct all the excesses done in the last seven years. It will be painful for the whole world for some years.
China will however come out strong and prosperous out of all these intermediate term problems.
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