Since the Asian financial crisis of 1997-98, most developing Asian economies have rapidly increased their external surpluses and accumulated foreign reserves to reduce their vulnerability to future shocks. China has amassed over $700bn. Even the city state of Singapore has $100bn, giving it the region's highest per capita reserves.
Asian surpluses have their main counterpart in the expanding US current account deficit, and economists and policyrnakers have warned for months that global financial imbalances are becoming unsustainably large.
"It's certainly rising in the consciousness of Asian policymakers," says Frank Harrigan, assistant chief economist of the Asian Development Banks.
To induce the inevitable correction -- and to allow it to happen in a controlled manner -- the US is being urged by foreign governments substantially to increase national saving and reduce its budget shortfall to help cut the current account deficit.
But the US in turn has called for action from Asia: Washington wants China and other exporters with fixed or tightly managed exchange rates to revalue their artificially weak currencies to help rebalance trade, and to promote domestic consumption and investment.
This year, there have already been signs that the build-up of Asian reserves is starting to slow, although not because of US pressure. Higher oil prices have cut into the trade and current account surpluses of Asian oil importers, and the foreign direct investment and portfolio inflows that have added to reserves since 2003 have also begun to fade in several Asian countries.
Taiwan, for instance, has seen a continuous decline of its trade surplus over the past two years and even recorded five monthly trade deficits over the past 16 months. In the first eight months of this year, the island's accumulated trade surplus amounted to $1.17bn, down 79 per cent year-on-year.
Ian Macfarlane, Australia's central bank governor, said recently there were early signs that global imbalances were being unwound and normality restored as a result of the gradual increase in US interest rates and China's abandonment in July of its controversial currency peg to the dollar.
Mr Harrigan of the ADB agrees that there are signs of movement. "Aside from China, we're already past the peak. Current account surpluses are beginning to nudge downwards," he says. "And we would expect to see capital inflows coming down as interest rates in the US continue to rise through next year."
The trend, however, is not universal. South Korea's trade and current account surpluses are expected to fall this year from the levels of 2004, but to increase again next year.
China is an even more important exception. As Diana Choyleva. of Lombard Street Research pointed out recently, although Asia's "tiger" economies have tended towards narrower current account surpluses, the decrease in their surpluses has so far amounted to only about half the increase of the Chinese surplus.
The modest scale of China's July revaluation of the renminbi was a clear demonstration of the reluctance of Beijing leaders to take dramatic action to address global trade imbalances.
The 2.1 per cent rise in the renminbi against the dollar was much too small to make any serious dent in a trade surplus that has already reached $60.2bn in the first eight months of this year -- nearly double the $32bn recorded for all of 2004.
During a visit to New York last month, Hu Jintao, Chinese president, said he was willing to work with Washington to increase China's imports from the US. "What I would like to stress here is that China does not pursue a huge trade surplus with the US," Mr Hu said.
The relatively smooth introduction of the new foreign exchange system may strengthen the hands of those in the central bank who believe that further renminbi rises are in China's economic interest. Beijing officials, however, have long argued that primary blame for the trade surplus does not lie with China, but with a US that saves too little and spends too much.
The second choice available to Chinese and other Asian policymakers -- boosting domestic consumption -- is proving almost as difficult as currency revaluation.
Economists say that in much of Asia there is not as much scope for increased private consumption as outsiders believe. Corporate savings are high and there is room for growth in corporate investment, but Asian governments are wary of the kind of unprofitable overinvestment that helped to precipitate the Asian crisis eight years ago.
In the meantime, Asian governments have to a large extent recycled their surpluses by buying US Treasury bills, thus financing the US budget deficit and so sustaining the US spending that keeps Asia's export industries working at full tilt.
This financial merry-go-round gives Asia two reasons to fear a drastic correction of the world's financial imbalances and a collapse of the US dollar.
Asian governments would suffer a sharp fall in the value of their dollar holdings and, more importantly, would see their export-dependent economies hit hard by a US slowdown.
Asia's main aim, therefore, is to make the inevitable correction as smooth as possible. "There's a good chance of a soft landing, where you would see a continuation of a gradual appreciation of Asian currencies, combined with an expansion of domestic demand in Asia," says Mr Harrigan.
Under syndication arrangement with FE