It warns that inflation will continue to pose a serious challenge to policymakers across the region, including China. Inflation is expected to rise to 6.3 percent for the region, more than double the rate of the past 10-year average. The core inflation, a measure of price increases that excludes food and energy costs, is rising in the region, a sign that a more broad-based second-round price effect may be under way, it said.

China has seen its consumer inflation drop to 7.1 percent in June from the peak of 8.7 percent in February. But analysts said the possible energy price liberalization may make inflation rebound in the coming months.

"Rising inflation is a serious threat to the region's sustained, strong growth as high import costs of food and fuel threaten to trigger a price and wage spiral, unleashing more inflation," said Lee Jong-wha, head of ADB's office of regional economic integration.

Growth in ASEAN member economies is expected to ease by 1 percentage point to 5.5 percent in 2008, according to the semi-annual AEM.

(China Daily July 23, 2008)