The trauma from the 2008 “Lehman shock” still looms large in the psyches of Asian policymakers. This can be seen by how quickly Credit Suisse’s stumble seemed to transport officials back to the events of 15 years ago.

So far, the “Credit Suisse shock” has been far less cataclysmic. And thankfully so. Unlike Lehman Brothers, the Swiss giant was rescued by UBS AG.

Whether that forced financial marriage will work is anyone’s guess. But Credit Suisse’s troubles, coming on the heels of the Silicon Valley Bank crisis in the U.S., has economists adjusting downward growth prospects for the region.

China will be no exception, as headwinds from the West make Beijing’s 5% gross domestic product target look less and less attainable.

Even before most Asians had ever heard of SVB or New York-based Signature Bank, China was finding it harder than expected to bounce from the Covid era. While respectable, the 3.5% rise in retail sales over the first two months of the year isn’t the stuff of an explosive rebound.

Now, the external sector is darkening as rising interest rates take their toll. In the U.S., for example, the most aggressive Federal Reserve tightening cycle since the mid-1990s is hitting the housing sector. Over time, the combination of the worst inflation in 40 years and rising yields is sure to weigh on the biggest economy.

The SVB collapse suggests the risks of fresh financial turbulence are festering just under the surface. This dynamic augurs poorly for business and household confidence as 2023 unfolds.

Europe has its own troubles, ranging from recession risks to elevated inflation to jittery bond markets. And now, the risks of fresh financial turmoil hover over the region’s economies.

Credit Suisse lucked out. Its rescue at the hands of UBS made it the Bear Stearns of 2023. Back in 2008, the run on Bear Stearns’ assets saw JPMorgan Chase swoop in to buy the Wall Street icon. In 2023, UBS is in the JPMorgan role.

What remains to be seen, though, is whether Credit Suisse is the tip of the proverbial iceberg, too. In 2008, Wall. Street celebrated too early over the Bear Stearns affair. Next came Lehman, of course, followed by the ginormous American International Group.

The People’s Bank of China last week surprised markets with a 25 basis-point cut in the reserve requirement ratio for financial institutions. Jiang Qiming/China News Service/VCG via Getty Images

This is the increasingly shaky global economy that Chinese leader Xi Jinping hopes to harness to reach 5% growth. That could be easier said than done as global stock markets gyrate wildly, perhaps imparting a negative wealth effect that torpedoes consumer demand.

At present, “risks in the overseas banking sector are increasing and global liquidity is under pressure, and the external environment is becoming increasingly complex,” says economist Wen Bin at China Minsheng Bank. “In the first two months of this year, China’s main economic indicators showed a positive trend, but the overall recovery foundation is not yet solid.”

Such risks help explain why the People’s Bank of China last week surprised markets with a 25 basis-point cut in the reserve requirement ratio for financial institutions. The step injected a what-do-policymakers-know-that-we-don’t energy into markets.

That the Fed thought it could sneak in another tightening move despite market turmoil suggests an air of denial at the U.S. central bank. It’s a reminder that the globe is 6 to 12 months ago from really knowing how much damage these last Fed rate hikes will do.

The 1994-1995 Fed tightening cycle set in motion Asia’s 1997 financial crisis. Over time, currency pegs to the dollar became impossible to maintain in Bangkok, Jakarta, Seoul and beyond.

Will the same happen in 2023? Only time will tell. But there’s a growing risk that central banks will over tighten 1997-style and continue to keep Asia on edge.

The big worry is that global events will derail Asia’s expectations for 2023. The PBOC’s firepower is considerable. But it’s not enough to propel the second-biggest economy back to its pre-Covid glory.

For now, China is stuck with a daunting to-do list to recalibrate its economy. The Credit Suisse chaos, though, is quite the spoiler. So is the fact that economists everywhere are looking at where global markets might stumble next. The good news is that China has a number of ways to revive economic growth–and put the nation on a livelier path.

The Credit Suisse trauma, though, reminds us that China’s 5% growth target is more contingent on global events than meets the eye. And the myriad of risks hitting markets in 2023 mean China’s revival is easier said than done.

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