Asian shares fall on China fears

Japan’s main share index fell by nearly 2%

Asian shares have fallen after Chinese stocks slid on fears of an interest rate rise and tighter credit.

Japan’s main share index fell 1.9%, while in China the Shanghai Composite Index fell 3.4%. Hong Kong’s Hang Seng index dropped by 1.1%.

Analysts said the concern was over how hard China would act on inflation.

European shares had fallen on Monday, on fears a 85bn-euro ($113bn; £72bn) bail-out for the Irish Republic may not end Europe’s debt crisis.

Earlier this month, China’s central bank raised the amount of money that lenders must keep in reserve, as it moved to try to control the country’s high inflation.

It was the fifth time this year that the central bank had made such a move, and came after Chinese inflation hit a two-year high of 4.4%.

The Japan’s Nikkei share index ended Tuesday down 188.95 points at 9,937.04, after touching a five-month closing high of 10,125.99 on Monday.

Elsewhere in Asia. the Australian S&P/ASX200 index shed 0.7% to 4,587.10.

Benchmark indexes in India, Singapore, Indonesia, Thailand and the Philippines were also lower, although South Korea’s Kospi index was up 0.3% to 1,901.64.

On Monday in the US, the Dow Jones index had closed down 39.51 points, or 0.36%, at 11,052.49.

Rising prices in China are, at present, mainly restricted to food.

But analysts think price pressures could spread to other areas, unless China increases interest rates and tightens credit to deal with inflation.

“There is a little nervousness about how hard the policymakers will have to slam on the brakes to contain inflation,” said David Cohen, an economist with Action Economics in Singapore.

Investors are also concerned the Irish Republic bail-out may not be enough to prevent Europe’s debt crisis moving to another country.

“We still have concerns about the eurozone sovereign debt. It’s one more threat to the global economy,” Mr Cohen said.

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