The deepest financial crisis since the Great Depression is likely to do more than years of international prodding to wean China and its Asian neighbors from their export-led model of economic growth.
Washington's $700 billion mortgage bailout plan will reshape the U.S. financial industry, perhaps for a generation or two, in ways that are not yet clear. The fallout for the rest of the world will be far-reaching.
But for Asia, one consequence of the turmoil is already inescapable. After living beyond its means for many years, America will have to rebuild its savings, so consumption will fall. Exports to the United States from China, Taiwan, Hong Kong and now South Korea are already weakening.
"I think this is a wake-up call for China," said Stephen Roach, the chairman of Morgan Stanley in Asia.
Roach says that he expects U.S. consumption growth to halve - to about 2 percent - as debt burdens are pared.
As economic weakness spreads to Europe and Japan, the impact on China's exports could cut its growth rate from about 10 percent now - already down from 11.9 percent in 2007 - to about 8 percent.
"It just underscores the fact that when you have a vibrant but very large export sector, when you have an external shock and you don't have a lot of dynamism on the internal demand side, you have greater risks to growth," he said.
Central banks in the region are already responding. Taiwan, China, Australia and New Zealand have all cut interest rates.
Easing monetary policy is all well and good. Many countries can also afford to resort to fiscal stimulus.
But stoking domestic demand also requires changes that sometime shake the foundations of an economy - like scrapping deterrents to foreign investment in Japan, ending protection for favored groups in Malaysia or subjecting dominant companies to more competition in the Philippines and Hong Kong.
These are politically arduous tasks at the best of times. That's why economists wanted governments to get cracking on them while the going was good.
Countries instead largely shirked the challenge, content to rely on export-led growth by holding down their exchange rates. Quite apart from hindering the needed rebalancing of the global economy, an undervalued currency acts as a tax on domestic demand, Hong Liang and Yu Song, economists who follow China for Goldman Sachs in Hong Kong, said in a report.
The result is evident in the case of China, where household consumption last year came to just 35.3 percent of gross domestic product - an unprecedented low in peacetime for a major country.
This means that a lopsided economy has scant domestic demand to fall back on as the global downturn deepens. "The real costs of China's resistance to yuan appreciation are now becoming more apparent," Liang and Song wrote.
So what is to be done?
In the case of China, Beijing must provide affordable health care and education and beef up its flimsy pensions system so people need to save for a rainy day. But setting up the administrative structures to ensure extra money is well spent takes time.
"My worry is that there are a lot of things that China can do to boost domestic consumption, including on the fiscal side, but none of these things are going to happen very quickly," said Michael Pettis, a finance professor at Peking University.
For the region more broadly, a precondition of stronger domestic demand is a more efficient financial system. For too long, Asia has in effect contracted out to Wall Street the job of managing its excess savings. If Asia's surpluses now shrink and it keeps more money at home, the region will have to deepen its bond markets at last and, ironically, promote more financial innovation so capital can be invested productively.
With complex, new-fangled debt instruments now discredited, making the case for liberalization will be tough. Regulators in Asia will now be extremely cautious about approving any new forms of securitization, said James Seward, a financial sector specialist at the World Bank.
"No one would advocate that sub-prime types of securities be introduced in the markets, but the concern is that all new or emerging products will be stopped," he wrote on a World Bank blog.
