A momentous era in monetary history is over. A hike in short-term US interest rates for the first time in nearly a decade has called an end to the near-zero borrowing costs that have prevailed since the financial crisis. Equity investors welcomed the move, sending stock prices higher in the US, Europe and Asia. Even emerging markets, many of which have feared the fallout from a US rise, generally took the widely expected move in their stride.

The short-term reaction, however, should not obscure the fundamental challenge that a tightening in US monetary policy poses to developing economies that together account for about 35 per cent of global gross domestic product. If the Federal Reserve’s tightening trajectory is sustained in 2016 — and its own forecast suggests that it should be — the impact on two particularly vulnerable aspects could prove considerable. One of these is the unwinding of a huge emerging market borrowing boom that was fuelled by US-inspired easy money. Another is that China, beset by record capital outflows, could be forced to allow a deep depreciation of its currency, the renminbi.

The dimensions of the debt problem are forbidding. Some $9tn in capital has flowed into emerging markets since early 2005, inflating domestic debt levels to an unprecedented 160 per cent of GDP, up from just over 100 per cent before the financial crisis, according to data compiled by the Institute of International Finance, an industry association that has members in 70 countries. Most of this debt has piled up on the balance sheets of non-financial companies, which now owe around $24tn, or 90 per cent of total emerging market GDP. Households, which have also gorged themselves on cheap money, have built up debts of about $8tn, equivalent to another 30 per cent of GDP.

The danger now is that tightening US policy will foist a credit crunch on to emerging markets, increasing corporate defaults. Indeed, the squeeze already under way is stiffening. Emerging market companies are being asked to pay more to service debts, while sources of finance are dwindling, according to the investment bank arm of HSBC. Reinforcing these effects is evidence that the surge of capital that flowed into emerging markets over the past decade has started to reverse. The IIF forecasts that, for the first time since 1988, developing countries will suffer a net capital outflow this year.

Of course, the impact is not being felt evenly throughout emerging markets. Most exposed are countries such as Brazil, Indonesia, Russia and South Africa, which rely on a drip-feed of international capital to service ballooning domestic deficits and corporate profligacy. In addition, companies that have borrowed heavily in US dollars but earn incomes in their local currency are particularly vulnerable to the prospect of a stronger dollar backed by a more hawkish Fed.

China presents a challenge of a different nature. Its monetary cycle is out of kilter with that of the Fed, with analysts predicting that Beijing will cut its benchmark interest rate twice during 2016. Such loosening, coupled with capital outflows that surged to a monthly record of $113bn in November, may add to pressures on the renminbi to depreciate against the US dollar next year. If this happens, history has shown that an Asia-centred currency war may well erupt.

For these reasons, policymakers, executives and investors should guard against reading this week’s initial reaction to the Fed’s hike as a long-term trend. If the Fed maintains its tightening course, emerging markets could be laid low by a receding tide of money.