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China: Stocks roughly flat as policy dilemmas cause uncertainty

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[SHANGHAI] China stocks ended Thursday roughly flat, even as most other Asian markets rallied, with investors put off by signs that Beijing is trapped between unappealing policy alternatives as it battles to stimulate the sluggish economy.

The blue-chip CSI300 index rose 0.2 per cent, to 3,201.29, while the Shanghai Composite Index gained 0.1 per cent to 2,982.43 points.

China's central bank said late on Wednesday that the government would use multiple monetary policy tools and maintain ample liquidity and reasonable credit growth in the second half of the year.

On the same day, the National Development and Reform Commission (NDRC), China's state planner, said the country will find an appropriate time to cut interest rates and reserve requirement ratios (RRR).

Market voices on:

But the reference to interest rate and RRR cuts were later deleted by NDRC, a move interpreted by some as showing policy rifts among the various authorities.

"The government is facing a dilemma. Businesses are struggling under the current environment so NDRC hopes rate cuts can reduce their cost burden," said Yang Hai, strategist at Kaiyuan Securities.

"But easing monetary policies further risks fuelling property price bubbles, as people have little inclination to invest in the real economy." Most sectors fell, with transport shares leading the decline.

Bucking the trend, Vanke shares surged their 10 per cent daily limit after Caixin reported that rival Evergrande Group may have recently bought a roughly 2 per cent stake in the Chinese developer.