The IMF may be on the verge of offering Pakistan a loan to stave off bankruptcy, but Templeton’s veteran investor Mark Mobius believes China will proves to be the 'white knight' for the country’s economy.

Within the last week, there has been growing concern about the economic situation in Pakistan. This has fuelled worries about the security situation since political instability has been increasing in recent times. Mobius, however, says Chinese investment is likely to aid Pakistan and stabilise the surrounding countries.

‘I think China is going to invest in Pakistan and help them through their balance of payments problems so we can be a little bit more positive about the situation there. Pakistan is going through a slow transition back to parliamentary democracy and in the process some very tough economic decisions are required.’

On Tuesday, China slashed its interest rates by 27 basis points to 6.66% – a third such cut in six weeks. And while the reason behind lower rates is widely believed to be fear of slowing global demand, Mobius points out that China has not suffered as much as expected.

‘There’s no question there will be a hit to the export market’, Mobius conceded. ‘We have seen that in a number of countries around the world but the actual exports of China have not come down yet. Some of the demand for Chinese products is ever-lasting because China is the only place that can make these products for these prices,' he says.

Mobius believes that the Chinese economy will continue to grow at around 6-8%. ‘They’ve diversified their exports to emerging markets around the world and been pumping up domestic demand. So we see a surprisingly low decline in their exports but it remains to be seen how long the slowdown lasts,' he says.

Mobius thinks that the fate across wider-Asia in the financial crisis will largely depend on Japan and China. However he stresses that China is creating further demand by enacting substantial reforms for the country’s farmers who make up some 750 million of the population. These reforms will give farmers the rights to their land.

'They are going to generate an incredible increase in wealth in the countryside and that will translate to consumer demand,' he says.

In recent times, he has also been looking towards the so-called ‘frontier markets’ and is set to run a new fund focused on the theme. He points out that some of these markets have not suffered as much as their western counterparts, whilst valuations and potential remain vast.