The rise in the GDP growth forecast was the result of"a surge in bank lending and vigorous fixed-assets investment".

The government launched RMB 4-trillion-yuan (585 billion U.S. dollars) stimulus package in November last year, targeted at boosting economic growth.

"The policy has softened the blow from the global slump,"the ADB said.

China's economic expansion will grow by 8.9 percent in 2010, the ADB said, contributing the lift to the maintenance of the fiscal stimulus and a likely moderate recovery in the global economy in 2010.

The bank estimated China's consumer price index (CPI) would fall 0.5 percent from a year earlier this year and rise 3.0 percent in 2010.

"Such a scenario might trigger a round of severe monetary belt-tightening in the medium term," the ADB warned, "if the monetary stimulus were to be withdrawn too quickly, there would be a risk of slowing down in growth".

"Authorities face the challenge of balancing the need to maintain aggressive monetary stimulus until growth is sustainable against the risk the flood of bank lending will be diverted into speculation and excess industry capacity," the bank said.

"The predicted 3-percent inflation rate in 2010 is mild and would not trigger big problems, which mean that China will not necessarily need to tighten its monetary and fiscal policy prematurely, gearing down economic growth," said Zhuang Jian, a senior economist with the ADB.

China's State news agency Xinhua reports that the Chinese economy is currently facing risks such as fragile overseas demand; uncertainty about the government's expansive fiscal policy, possible asset bubbles and non-performing loans caused by the slack monetary policy.

China should work harder in economic reconstructing, and in the promotion of domestic demand and employment, the ADB said

The Manila-based multilateral bank updated its forecast of average growth in developing Asian economies to 3.9 percent in 2009 from a previous estimate of 3.4 percent made in March.

It also raised its 2010 forecast to 6.4 percent from 6.0 percent.

Firm actions by many governments and central banks, relatively healthy financial systems and a rapid turnaround in less export-dependent economies have pushed forward the region's recovery from the financial crisis, according to the bank.