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     TOPS NEWS: China's policy makers could fine-tune current monetary and
fiscal policies to head off liquidity risks in both the financial and real
economies, Xu Hongcai, deputy chief economist at the China Center for
International Economic Exchanges, an advising-body run by National Development
and Reform Commission, told MNI in an interview. "Liquidity risk will be the
biggest risk the economy faces during the process of deleveraging over the next
three years," said Xu, stressing that the tone of a "prudent and neutral"
monetary policy and "proactive and expansionary" fiscal policy will not change.
     LIQUIDITY: The People's Bank of China injected CNY140 and CNY120 billion in
7-day and 14-day reverse repos on Wednesday, respectively, with rates unchanged
at 2.55% and 2.70%, to cushion the impact of tax payments and maturing reverse
repos and to keep liquidity conditions "reasonable and stable," the central bank
said on its website. This resulted in a net injection of CNY200 billion as a
total of CNY60 billion in reverse repos matured today. CFETS-ICAP's money-market
sentiment index closed at 44 on Tuesday, slightly up from 43 on Monday.
     DATA: The average price of new homes in China, excluding
government-subsidized housing, rose 0.6% from the previous month, accelerating
from the 0.4% m/m gain in March, according to MNI's calculations based on data
on 70 top Chinese cities released on Wednesday. The faster growth was buoyed by
gains in both tier-2 cities and tier-3 cities. Dandong city, the trading hub
bordering North Korea, saw the highest m/m price gain of 2% in April after the
inter-Korea summit, when some investors bid up property prices.
     MONEY MARKET RATES: 7-day repo average rose to 2.9025% from 2.7787%
Tuesday, after the PBOC injected net CNY200 billion by OMO. The overnight repo
average rate increased to 2.7724% from Tuesday's 2.6566%.
     YUAN: The yuan fell to 6.3695 against the U.S. dollar from Tuesday's
closing of 6.3535. Earlier Wednesday, the PBOC set the yuan central parity rate
to 6.3745 from Tuesday's 6.3486. Today's drop was biggest this month, which was
largely due to the rising dollar index.
     BONDS: The yield on the benchmark 10-year China Government Bond was last at
3.7050%, unchanged from the previous close, according to Wind Information.
     STOCKS: Shares declined in Shanghai, led by insurance companies on
disappointing profits from last year, with China Pacific Insurance Company
falling by more than 4%. The benchmark Shanghai Composite Index closed 0.71%
lower at 3,169.57. Hong Kong's Hang Seng Index was down 0.19% to 31,093.86. 
     FROM THE PRESS: The Chinese People's Political Consultative Conference
(CPPCC), the top advisory body, held a meeting on Tuesday stressing the need to
gradually diffuse financial risks and ensure the stability of the economy and
financial systems, according to Xinhua News Agency. The meeting called for
greater coordination among different financial regulators in preventing systemic
financial risks. Prudent and neutral monetary policy and tight financial
regulations should coordinate well to advance high-quality growth, Xinhua cited
Vice Premier Liu He as saying. Investors should assume full risks, borrower
should pay their debt and financial misconduct should be punished, Liu He said
according to Xinhua. 
     The focus of China's monetary policy may be switched to supporting growth,
China Securities Journal reported, citing analysts. Monetary policy may lean
more towards economic growth, echoing earlier comments by the Communist Party
Politburo which stressed boosting domestic demand, the newspaper said. Monetary
policy will still be prudent and neutral and guidance of market expectation will
be stressed, the Journal said. The PBOC's Q1 monetary policy report suggests
deleveraging at this stage will not focus on all sectors, but a few key sectors
such as local governments, SOEs and the property market, the newspaper said,
citing Pan Xiangdong, chief economist at New Times Securities.
     China should not take drastic measures when controlling local government
debt, Liu Shangxi, director of Chinese Academy of Fiscal Sciences, said in an
article published in the newspaper of CPPCC. At a time when several government
departments are looking to curb invisible debt, this may pose a risk to economic
stability, Liu said. Invisible debt resulted from unclear fiscal
responsibilities of different levels of government, the lack of a fiscal risk
assessment system, and the unpredictable higher-level government policies, said
--MNI Beijing Bureau; +86 (10) 8532-5998; email:
--MNI Beijing Bureau; +86 10 8532 5998; email:
[TOPICS: M$A$$$,M$Q$$$,MBQ$$$]

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