China must make a choice on how to combat the threat of inflation, one option is to raise interest rates in the country and another – to resort to increasing the value of the yuan. Such was the view of analysts at the Asian Development Bank. Like most countries of Asia and China significantly increased public expenditure and resort to a decrease in the rate last year. The purpose of this was to promote economic growth in the global recession, writes AR. Now, authorities in the region discuss options for the removal of economic incentives and increased interest rates to prevent the risk of overheating. ‘Over the next 12-18 months should interest rates rise significantly, depending on how monetary policy is conducted, said in a report, analysts at the bank. The document dealt with Southeast Asia and Hong Kong, Taiwan, China and South Korea. China should take quick action on economic policy back to its normal state, to avoid inflation or “hard landing”, considered by the bank. The persistence of price growth could be done by raising the exchange rate and the country must decide on which of the two ways to act, the report said. For South Korea, Malaysia, Singapore, Thailand and Taiwan is recommended a further increase in interest rates. Hong Kong, Indonesia, Philippines and Vietnam would also have to start cutting costs and tightening monetary policy, recommended by the bank.
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