China will have to continue to tighten to keep inflation expectations under control and, if Chinese demand falls, other emerging markets will follow suit, Mahendran added.
"I tend to believe that this tightening in China is going to surprise the markets … I think the tightening is going to really get much worse," he said.
"If China slows down it will mean the whole of Asia will slow down," Mahendran added.
A Helping Hand
China is also helping Europe buy the goods it exports by lending it money, just like it helped the US, Mahendran said.
Looking at the latest data, it seems that the Chinese are diversifying away from US Treasurys into European assets, he said.
"Europe is at the stage at which the US was three years ago. The Chinese are basically lending money to these blocks to buy their exports."
At the beginning of a visit to Europe, Chinese Vice-Premier Li Keqiang said China will continue to buy Spanish debt and expressed confidence in the Spanish financial market.
Besides Spain, Keqiang will also visit Germany and the UK.