REFILE-BUZZ-COMMENT-China can spend its way out of a mess unlike the rest

amends typo in headline from was to way

Jan 15 (Reuters) - Inflation in China is just 0.1% year-on-year, which will allow policy makers to pump the ailing economy with stimulus this year, unlike the economies of many other nations where lingering inflation is thwarting hopes for lower interest rates.

This could put the yuan under increasing pressure. Given a weaker currency, will help efforts to revive the economy, a drop will probably be tolerated but also controlled.

For China, which has more than three trillion dollars of foreign currencies in reserve, it's relatively easy for the central bank to effectively manage the yuan to avoid an unwelcome surge in volatility that may otherwise have unsettled investors.

The yuan, which has risen in value as larger components of the FX basket used to manage policy tumble, has been an issue of late, because its unwelcome rise is undermining attempts to boost growth.

To shift the yuan's direction the authorities may need to tolerate a stronger dollar, which is the biggest component of the basket. Should a USD/CNY rise unfold steadily, the additional stimulus could support the economy and the stock market.

This could support other equities in the region during a period when the weakness of emerging markets currencies following the yuan down may otherwise have harmed them.

Deeper slides for less liquid emerging currencies will probably fuel demand for the world's reserve currency and that may curb U.S. inflation, while fuelling it in the economies of the nations of the most-traded currencies such as the euro, yen and pound.

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(Jeremy Boulton is a Reuters market analyst. The views expressed are his own)

((jeremy.boulton@thomsonreuters.com))