China told rate hikes an option to hit inflation

China should boost interest rates or allow its currency to strengthen to help curb inflation pressures, the Asian Development Bank said yesterday.

China, like most Asian countries, boosted government spending and slashed lending rates last year to help spur economic growth amid a global recession.

The region's policymakers are now mulling how much to ease stimulus spending and raise rates to keep their economies from overheating.

"Over the next 12 to 18 months, interest rates may need to rise significantly depending on how exchange rate policy is handled," the development lender said in a half-yearly policy report on emerging East Asia released in Singapore.

The Manila-based ADB defines emerging East Asia as Southeast Asia plus China, Hong Kong, Taiwan and South Korea.

The ADB said Beijing's pledge last month of a more flexible exchange rate policy suggested the yuan might appreciate, which would help temper inflation pressures.

The ADB is forecasting 9.6 per cent GDP growth in China this year.

South Korea, Malaysia, Singapore, Taiwan, and Thailand should continue to raise interest rates while Hong Kong, Indonesia, the Philippines and Vietnam might soon need to cut spending and tighten monetary policy, the ADB said.

- AP