That switch now looks like a bad bet. China's economy is sputtering, its stocks are nose-diving and officials in Beijing appear ill-equipped to maintain the world's second-biggest economy as a stable, dependable trading partner. There's an obvious contradiction in developing nations relying so overwhelmingly on another emerging economy, and a highly unbalanced one at that. No doubt many in the region are now wishing they could decouple from China, too.
Asia may be able to do just that soon, argues Bloomberg Industries economist Tamara Henderson, thanks to the approach of the Fed's first tightening cycle in a decade. "Just as Asia decoupled from the US in the wake of the global financial crisis, benefiting from China's extraordinary stimulus at the time, Fed hikes may allow Asia to decouple from China," she writes in a recent report.
However contrarian, the idea the dreaded taper may be good for Asia has merit. It's hard to remember a moment since 2008 when markets were more panicked and central bankers so on edge. The conventional wisdom is that a Fed rate hike will send shockwaves around the world, sucking money back to the US and driving fragile nations to the International Monetary Fund for help. Such fears, however, lack perspective. For all the risks, Asia's fundamentals are comparatively sound. Financial systems are stronger, transparency greater and currency reserve hoards big enough to avoid another 1997-like meltdown.
At the same time, higher US rates are an indication that the world's biggest economy -- and customer -- is humming again. "The start of a rate hike cycle sends an important signal: it is time to be confident about the world's largest economy," Ms Henderson argues. "The Fed appreciates this and global investors will eventually, too."