“Be Prepared”. It’s the motto of every good Girl Guide. And it should have been the mantra of every major Asian central bank too, over the last few months. In the words of my Guide leader (admittedly a few years ago), being prepared means being ready to cope with anything that might come your way. And the US decision to raise interest rates for just the third time in a decade hardly came as a surprise. The Federal Reserve has been signalling for a while that it will go into what’s called a “tightening cycle” and start returning rates to neutral. That’s a jargon-ish way of saying interest rates in the US are going to gradually but consistently go up, so that they reach levels considered “normal”. Good for Asia?: First the good news. The fact that the US Fed isn’t raising rates faster than expected should come as a relief for many Asian economies. And in theory, higher US interest rates could be a positive sign for export-driven economies in Asia. Rates are going up because the economy is doing better, and a better performing US economy means that companies in Asia should be able to sell more to the US, because people there are feeling more confident. Also, as the US dollar strengthens, Asian exports become cheaper – again lifting potential growth rates for export-driven economies like China, South Korea, Taiwan and Japan. But those textbook economic theories don’t take into account a more protectionist trade environment in the US, under President Trump. Asia may get the short end of the stick if President Trump does as he’s promised and incentivises consumers to “buy American”. Don’t talk about debt, baby: Then there’s the debt which many Asian companies hold that needs to be paid back in US dollars. Here’s a quick history lesson: When US interest rates were low or near zero and Western economies created the quantitative easing programmes, cheap money flowed into Asia, boosting property and stock prices. It also made borrowing in US dollars cheaper, which is why so many Asian corporates took on high levels of debt to fund their rapid expansion. So those stellar growth rates we in Asia have enjoyed over the last decade? A lot of that has been thanks to the borrowing of cheap money, which some Asian companies are now going to struggle to pay back.