CHINA'S economy will continue booming on the back of rapid economic reforms but inflationary pressure is also mounting, the Asian Development Bank (ADB) says. After three years of slower growth, China's gross domestic product (GDP) is expected to show an increase of 12.8 per cent for last year, making it the best performer in Asia in terms of GDP growth. The figure is substantially higher than the average GDP growth of 5.2 per cent over the previous three years. China's GDP was forecast to grow 11 per cent this year and 10 per cent next, the bank said in its Asian Development Outlook. ''The current economic boom is likely to continue during the next two years,'' the bank said. However, it said concerns had been growing over the side-effects of rapid acceleration of growth, especially with the absence of an effective macro-economic management system within the country. The bank said such a system was immediately needed if China was to avoid an overheated economy and the emergence of excess demand. It had become more difficult for the Chinese Government to tighten its control on the scale of investment because only about 10 per cent of investor funding came from state budgets, it said. Fixed investment expenditure was estimated to have increased by about 38 per cent last year, the highest in the past four years, it said. The excessive investment was due to incentives provided to enterprises and localities by soft budget constraints and the lack of market-driven, self-regulatory mechanisms, the report said. Inflation has been high: the consumer price index rose 1.3 per cent in 1990 and accelerated to 5.1 per cent in 1991 and 6.4 per cent last year. A cost of living index covering 35 cities showed a rise of more than 10 per cent last year, which the report said was due largely to price deregulation on many kinds of commodities. ''The rapid acceleration of economic growth has caused some concern that economic instability, which accompanied earlier bouts of exceptionally strong growth, may re-emerge,'' the bank warned. The bank was forecasting that the inflation rate would increase a further nine per cent this year and 8.5 per cent next. It predicted China's export growth would average 15.5 per cent over the next two years, down from 16.5 last year. Imports were seen growing an average 24 per cent this year and next against 26 per cent last year. The report noted: ''While the acceleration of economic growth was the main reason for the strong demand for imports, other reasons include the relaxation of some import controls and reform measures in the import management system.'' The bank said China's strong desire to join the General Agreement on Tariffs and Trade (GATT) would encourage more rapid changes in the external sector. ''Some important changes to China's re-entry to GATT are likely during the next two years, partly as a concomitant of China's re-entry to GATT and partly as a result of bilateral negotiations with the country's major trade partners,'' the report said. The fiscal situation was expected to improve in the next two years, in part because of continuing strong economic growth, the reduction in subsidies to state enterprises and a contraction in the functions of the government, it said. External debt was estimated at US$65 billion for last year, but the ADB forecast this would rise to $69 billion this year and shoot up to $74 billion next.