MNI China Press Digest May 14: RRR, M1, Homebuying

Highlights from Chinese press reports on Tuesday:

• The People’s Bank of China may cut the reserve requirement ratio as early as mid-May to support the issuance of ultra-long-term special treasury and local-government bonds, the Shanghai Securities News reported citing analysts. Interest rate cuts may follow to coincide with a new round of bank deposit rate cuts, while the window of opportunity may be the phased decline of the U.S. dollar, the newspaper said citing Tao Chuan, chief macro analyst at Soochow Securities.
• China saw a wide gap between M1 and M2 growth in April as deposit attractiveness fell relative to financial management products, according to China International Capital Corporation Researcher Zhou Peng. Banks were not required to pay customers any additional interest above the authorised upper limit of deposit rates in April, which contributed to the replacement of deposits with financial products, Zhou added. Looking ahead, market analysts said low M1 growth compared to M2 indicates the real economy lacks dynamism and fiscal and monetary policies are urgently needed. (Source: Yicai)
• Cities relaxed housing restrictions have ushered in a short-term upward trend in housing transactions, National Business Daily reported. Hangzhou in Eastern China, which fully scraped homebuying restrictions last week, has seen home prices in Gongshu District rising to CNY53,400 from CNY33,000 per square meter, with potential buyers coming from out of town. Some buyers have paid deposits on the spot, the newspaper said citing an unnamed saleperson at a high-end villa sales office in Xihu District.