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Strictly speaking, it is still unclear whether or not China
Strictly speaking, it is still unclear whether or not China will help its ally Pakistan to survive the financial crunch. New Pakistani President Asif Ali Zardari's first visit to Beijing late last week shed no light on the matter. The media only quoted the Pakistani Ambassador in Beijing as saying that China will provide financial aid to Pakistan to overcome the economic crisis.

Pakistan is said to be in desperate need of a $3-4 billion credit to pay off its huge debt of $500 billion. Islamabad is in a true debt hole and China has the capacity to bail out its ally.

In September the UN held a meeting of the Friends of Pakistan Group (including the U.S. and a couple other states), where another sum was mentioned: $15-$16 billion. Funds are urgently needed; without them, the whole financial system is at risk of collapsing, which could result in a sovereign default next year.

On the one hand, this situation is not new. Bailing out Pakistan and a dozen other LDCs has been the global financial system's routine job, with the International Monetary Fund and other bodies addressing such problems.

On the other hand, the situation is completely new, in that Pakistan has reminded world business and political circles about something they have yet to deal with. The thing is that not only the U.S. and Europe, that is EDCs, need bailing out - a number of other countries require financial aid as well.

The previous "regional" Asian financial crisis of 1997-1999 taught the world a lesson - some countries' financial systems are organized so as to allow governments to minimize the economic crunch's negative effect. For example, states with nonconvertible currency have an advantage. One may rightfully ask, "How can the crisis that broke out on New York's Wall Street affect developing countries?" It is hard to say anything for sure.

What is curious is that New Delhi recently hosted the third summit of India, Brazil and the Republic of South Africa. On the surface, the meeting can be regarded as part of India's diplomatic routine, just like ministerial or presidential forums within another "triangle" - India, Russia, and China. It should be noted that Brazil has recently joined that triangle.

Such meetings are usually held to coordinate the participants' actions, rather than arrive at certain decisions, and mostly consist of negotiations among officials. A great deal of interesting facts can be learned by studying the scripts of the recent meeting.

First, the developing world is getting increasingly irritated at what Brazil's President Luiz Inacio Lula da Silva describes as rich states turning the world into a casino. Here, political motives, not economics, prevail.

Second, the developing world's leaders believe that one of the ways out is through helping each other and developing economic relationships without relying on the "gambling" West.

Third, the current crisis may spread to the Third World, another topic discussed in New Delhi. Local banks may cut credits, including consumer credits; furthermore, with rich countries' demand for raw materials decreasing, their prices in developing countries will fall. Currency exchange rates may also go down, which would reduce imports from EDCs, further aggravating the crisis. Finally, a lot of people working in Europe and America transfer money to their families in LDCs, a factor that must be taken into consideration. According to the UN, Africa receives up to $40 billion annually in the form of money transfers, which account for 20-30% of Liberia, Zimbabwe and Somalia's GDPs. In the midst of the current crisis, however, the transferred sums are diminishing, because the "dismissing reflex" in Western business, not always economically sound, has mainly affected foreigners.

Thus the world's economic crisis has yet to reach its peak - and the Third World is likely to exacerbate the problem. It is still unclear who will suffer as a result of the falling oil and gas prices, and how. In addition, no one is certain where the new foodstuffs crisis is heading, or whether agricultural production prices will go down. It seems as if the majority of states do not see lower prices as a blessing. All that said, there are plenty of questions yet to be answered.

Meanwhile, the political aspect of the future operations to rescue the sinking LDCs is quite clear. China has given loans to Pakistan many times, but in the past this was regarded as a tool against India. With this policy becoming less relevant, China and India are slowly developing closer ties. At the same time, buying out a country is, at the very least, a good PR move at the global level. In addition, it is a chance to prevent the IMF from taking control of Pakistan, whose government is actually reluctant to become further dependent on the IMF.

As a matter of fact, the world's shrewdest leaders are already considering what the international arena will look like after the crisis, who will win and who will lose. Unlike the IMF and the West in general, China has been pursuing a wise and effective policy in Africa for years, aiming to become the region's most influential power. The Forum on China-Africa Cooperation and a number of other bodies have actively promoted "a new type of cooperation."

Protecting its African partners from the crisis would cost China less than paying off the U.S. and Europe's debts. Should Beijing take a prudent approach, coupling financial aid with new contracts and trade development (which can be seen now, during the Pakistani president's visit to China), it would serve as a good "cure" for possible forgetfulness and ingratitude in the future.

You can even expect a sort of competition to rescue at least a few countries that find themselves in trouble. There is little doubt that Pakistan, a nuclear power "at the forefront of the struggle against Al-Qaeda and the Taliban", will be a priority.

The opinions expressed in this article are the author's and do not necessarily represent those of RIA Novosti.


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