A large amount of capital has flowed into Asia in recent years but the risks posed by these inflows are generally exaggerated. Asian central banks have mopped up net inflows and recycled them into reserves. As such, it is perhaps no surprise that there is little evidence that foreign capital has inflated asset bubbles or supported unsustainable spending. The risk of instability if money did flow out of the region as the US Fed starts to tighten is therefore low.
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