Think back to the decades before the Global Financial Crisis. The US economy was Asia’s primarygrowth engine. Soaring imports would lift growth across the region as American consumersbought more shoes, electronics, bicycles, and much besides. Interest rates also followed the UScycle, rising when growth was brisk and falling when demand slumped. A neat process, balancingitself over time, as Asia’s economy was tethered to that of the United States.。    No longer. China is now what matters for growth. Its economy contributes around 30per cent ofglobal GDP growth. More and more, Mainland consumers are what matters for exporters acrossthe region. As flashy as the new iPhone may be, vastly more smartphones are sold in China eachyear than in the US. These require components from Korea, Taiwan, and beyond. Commoditiesfrom Indonesia and Malaysia are now sold mostly to Chinese, not American, manufacturers. AndMainland tourists in Thailand and Hong Kong are filling hotels and malls. Then there isinvestment: China is building plants and infrastructure through much of ASEAN and further to theWest. An integrated and increasingly inward looking Asian economy in the making.。    And yet, interest rates are still set, by and large, a world away. The Fed rules. Its easy money overthe last nine years has stoked credit and fired up local investment and consumption. True, it mayhave gently nudged short-term rates higher over the past year, but its now vast balance sheet haskept longer-term funding costs nailed to the floor. Capital, as a result, has poured into the region.The weak dollar has further eased financial conditions in Asia. Demand from China has liftedgrowth, and cheap funding, courtesy of the Fed, has amplified it further. The best of all worlds.。    That may not last. Now partly tethered to the Fed, and partly to Chinese growth, much of emergingAsia is in a precarious situation. Tensions are building that may expose a fault line nowunappreciated. Monetary conditions may in the future no longer suit the region’s growth prospects.。    China’s torrid pace of development, after all, is likely to cool. A new ‘regulatory storm’ issweeping the Mainland. Hardly a week goes by without new stipulations for the country’s financialinstitutions to curb their risky lending. These may not yet have made a dent, but regulators arepressing ahead, hinting they will push for full implementation later this year or in early 2018.Without other reforms, such as that of state-owned enterprises, slowing credit is bound to curbdemand. When China sneezes, emerging Asia may need more than a scarf.。

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