The recent financial crisis saw a global syncronised boom turned into a syncronised bust. It was partly fuelled by excessive credit growth and low costs for risk takers. Mercantilist North Asian economies such as China, Japan and South Korea pursued cheap-currency and full-employment policies while the monetary marvels of the West gladly supplied a loose lubricant for a deflationary environment.
The consumption binge in the US spiralled to over 70 per cent of GDP and it was clear that we did not need a fat lady to sing to know we had reached the end. Collapses of a couple of the world's biggest financial institutions made us realise that the party was truly over.
Some Asian economies - China , India, and Indonesia in particular - escaped thanks to swift government stimulus and resilient domestic consumption which led some to dream of a decoupling from the meltdown in the West. It was perhaps an incremental decoupling but one on which the East cannot rest its laurels.
The recovery in the US will not be smooth given that a couple of years of anaemic employment figures likely lie ahead.
There is, then, little chance that interest rates in the West will normalise any time soon and the zero interest rate policy has the potential to destabilise Asia and create an asset bubble, especially if Asian currencies remain undervalued. The Chinese know what they have to do, but the appreciation of the yuan is a sensitive subject and China certainly does not want to be seen as acting under pressure from the USA.
They will also want to see exports stabilise and grow month on month before embarking on a gradual appreciation. With easy money flowing into Asian assets, a significant rise in the value of Asian currencies seems like a no-brainer. Do not rule out a form of the capital gains tax that Brazil used, albeit unsuccessfully, in dealing with hot capital inflows.
In relation to its developed counterparts, the size and wealth of the Chinese economy may not be large now but this is where the highest incremental growth will come over the next three to five years.
The positive divergence from the West will be led by China-centric Asia and, while there are some encouraging signs that Asian governments are attempting to formulate policies towards a domestic-demand-driven model, a few speed bumps lie ahead and the transition will not be easy. It is one thing to be leaders in manufacturing, quite another to be a global services leader.
No matter how tough or painful the transition will be, China will be left with no choice but to shift its economy up the value chain. A few years ago, not many outside China had heard of Lenovo, Haier, Alibaba, Air China and CCTV. But as their quality improves, we can expect them to become household names in the near future.
China is thirsty for resources, and the process of regional integration will speed up with so much mutual benefit at stake. Thus, Thailand's exports to China grew by almost 100 per cent in January and by 67 per cent to Asean destinations but sales to the US were up only 16 per cent.
Similar statistics can be seen across Asean and this will be amplified as China's appetite grows. Indonesia's coal, Malaysia's palm oil, Thailand's rice, Vietnam's electronic parts and Australia 's iron ore are just some of the items on China's shopping list.
Asean+6 (Brunei, Indonesia, Malaysia, the Philippines, Singapore and Thailand) will continue to work toward a trading bloc to rival those of the EU and NAFTA.
One must also not forget the rising aspirations of Arab countries as they look away from the West and rediscover China via "the new Silk Road". The development of these relationships will drive the next phase of global growth but each Asian nation will still need to look for substantial internal reforms to drive growth over the long term.
A global economic upswing can make an open economy look good for a while but you will still need to tackle reforms on education, pensions, jurisdiction and environment if you want to stand tall on your own.
All roads may lead to China at present but one cannot assume the sustainability of one's economy on this basis alone. How long can China sustain growth at current rates and how well can other countries cope with this new engine driving countries forward?
We have seen the key demand and investment forces swap from Japan in the '80s, to US in the '90s and China in 2000s. Asians need to be prepared no matter who will be in the driving seat this decade.
Prinn Panitchpakdi is a senior regional equity manager with CLSA, a leading investment bank based in Hong Kong. Views expressed are his own.
