Decoupling was the buzz word last year among commentators desperate for light in the financial gloom. It described the detatchment Asian economies had achieved from the West that would enable them to avoid the contagion from the credit crunch.

It has been largely discredited as analysts recognised that Asia's credit cycle was finally taking a turn for the worse. China, the region's powerhouse, was expected to suffer as the West's taste for exports declined. As a result, shares in HSBC and Standard Chartered, the Asia-focused British banks, were hit hard.

Their falls picked up pace from October 20 and were helped further downward by price target cuts by Morgan Stanley on October 24 and hit a three-month low on October 27. They have since partly recovered, Standard Chartered closing yesterday at £10.04, down 11p, and HSBC up 5p, at 767p, both aided by Standard Chartered's upbeat third-quarter update last week.

However, Alex Barrett, global head of client research at Standard Chartered, believes that the doom-mongers do not understand Asia's, and particularly China's, resilience to a Western downturn.

Both banks believe that commentators overstate China's reliance on exports, which contributed about 20 per cent of its 11.9 per cent GDP growth last year.

The peculiarities of its property market mean that China is buffered against the lending problems afflicting Western banks. If the country can successfully stimulate its domestic market, it can ride out the global financial downturn, they said.

Mr Barrett said: “China is probably the best placed among all countries to cope with a slowdown. They cannot continue to base their economy on exports. They have to develop the domestic economy and if they do the right things - and there is no reason to think that they will not - this is a great opportunity for that to happen.”

The Chinese authorities have moved to re-energise exports by introducing tax rebates on November 1.

Shanghai-listed banks were limited by financial regulators to increasing their loan books by 13 per cent this year, which prevented the reckless lending that caused problems in the UK and US.

The Chinese authorities recently lifted this limit for some sectors such as small and medium-sized enterprises, to encourage banks to lend to companies that catered for the domestic market.

The Chinese property market is kept buoyant by the movement of about 10 million workers from rural areas to the cities every year, ensuring that housing developments are swiftly filled.

The minimum deposit required from homebuyers to obtain a mortgage recently dropped from 30 per cent to 20 per cent to further boost property demand. Also, Chinese banks have just 24 per cent of their assets in property which means that they have less exposure should impairments rise.

China is expected to stimulate domestic spending by using some of its fiscal surplus on infrastructure projects. Previously the Government pumped cash into roads and railways to boost employment. Mr Barrett said that he hoped that China would this time focus on schools and hospitals.

The country has the highest savings rate in the world, with workers putting away half of their annual income to pay for education, medical treatment and retirement.

Mr Barrett said: “We hope that the Chinese authorities will use the fiscal surplus to develop schools and hospitals because if they put the money into social infrastructure then the pressure for people to over-save will be reduced and they will be able to spend the cash, boosting domestic demand.”

Richard Yorke, chief executive and president of HBSC China, expects the authorities to take careful note of how the West copes with the downturn.

He said: “The Chinese authorities are interested in what is going on globally so they can learn not to make the same mistakes. This is something that they are good at - examining what has worked and what has not elsewhere and choosing the elements they would like to adopt.”

HSBC expects China to put economic stimulus in place to stop GDP growth slipping below the 9 per cent it hit in the third quarter.

Standard Chartered expects growth to slow to 9.3 per cent this year, 7.9 per cent next and 7.1 per cent in 2010, though a worst-case scenario could see it fall to 4 per cent.

Richard Meddings, finance director at Standard Chartered, added: “We do see Asia slowing but only to levels of growth the West would give its eyeteeth for.”

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