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China and BRIC

China and BRIC
According to the International Monetary Fund, the four emerging markets of Brazil, Russia India and China (also known as the BRIC nations) maintained an average growth rate of 10.7% from 2006 to 2008.

These countries are blessed with an abundance of natural resources; according to the World Bank the gross reserves of mineral resources in India, China, and Brazil stand at $3.57 trillion, $3.18 trillion, and $1.11 trillion respectively. In comparison, Britain and Japan’s reserves are estimated at $290 billion each and Germany’s stand at $340 billion.

The BRIC countries all share certain common features: all are large in terms of geographical area and population and possess vast quantities of natural resources and huge market potential.

With economic ascendancy comes increased geopolitical clout: China, Pakistan’s closest ally, just announced plans to boost nuclear power generation capacity nearly eightfold by 2020, to 70 giga watts (GW).

In 2007, China, the world’s second largest power market after the United States, set a target for boosting its nuclear capacity to 40GW by the end of 2020, but is likely to meet that goal five years earlier following a slew of project approvals.

China has 11 working reactors with 9GW of total capacity, or just over 1% of total installed power generation capacity 0f 874GW, about three-quarters of which is fuelled by coal.

Recently China significantly reduced its holdings of U.S. Treasury securities. Japan overtook China as the largest foreign holder of U.S. Treasury securities at the end of 2009 after China sold $34.2 billion in American securities last December. This was the largest single month reduction by China in years, which accounted for 4% of total Chinese holdings. This precipitous reduction was viewed as being the result of escalating bilateral trade and political differences between China and the U.S.

Explaining the reason for this decision, Liu Yuhui, Director of the China Economy Appraisal and Rating Center of the Institute of Finance and Banking under the Chinese Academy of Social Sciences told Xinhua News Agency: “It was the right time to reduce the U.S. Treasury securities holdings, because, in the long run, we expect a downward tendency in the value of U.S. dollars.”

Once a world leader in textile exports, Pakistan has been outpaced by India and China which are now the world’s top textile producers. China is helping Pakistan in developing new hybrid varieties of cotton, paddy and oil seeds. This will be a big step for Pakistan in developing its agricultural base. The two countries have also signed a memorandum of understanding to build 12 dams in Pakistan to alleviate Pakistan’s water and energy problems.

In spite of Pakistan’s current economic challenges, Foreign Minister Shah Mehmood Qureshi in an interview with the Beijing Review earlier this year expressed his confidence in Pakistan’s economic potential and its special relationship with China: “With friends like China coming in to help us in key areas, I see things changing for the better in Pakistan.”

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