China NDRC researcher sees interest rate hikes in H2

* Inflation may worsen if China does not raise interest rates -paper

* More reserve ratio increases could hurt China's growth -lawmaker (Add comments from a researcher)

SHANGHAI/BEIJING, June 23 (Reuters) - China's central bank is more likely to raise interest rates in the second half of 2011 than order banks to put more deposits as reserves at the central bank, a senior researcher from a government think-tank said.

Chen Dongqi, deputy chief of the macroeconomics research institute, said Beijing would not relax its monetary policy for fear of a resurgence in inflation and a climb in local government investment.

Chen, whose think-tank falls under the wings of China's top economic planner the National Development and Reform Commission, was quoted as saying so in the official China Securities Journal.

His comments were in line with the paper's front page editorial on Thursday, which argued that China should raise benchmark interest rates soon to tame inflation and aid economic restructuring, even if that hurts growth.

Chen said China's annual economic growth for 2011 would fall between 9-9.5 percent, but he said a hard landing is a remote possibility in the world's second-largest economy.

China's central bank has relied more on raising reserve requirement ratios than interest rate increases so far this year to check inflation.

Rate rise fears likely to unsettle market

SHANGHAI stock market is expected to remain weak this week on concern the central bank will raise interest rates to cool inflation.

The benchmark Shanghai Composite Index lost 2.3 percent to 2,642.82 points last week after the People's Bank of China announced it would raise lenders' reserve requirement ratio for the sixth time this year as data showed inflation in May was 5.5 percent, the highest in 34 months.

Shenyin and Wanguo Securities said inflation in June could be even higher, so further monetary tightening is almost unavoidable.

"The market could see further pullbacks in the next two weeks before bottoming out in early July," the brokerage said in a note, forecasting the key index to fluctuate between 2,600 and 2,680 points this week.

HK bond issuers lack avenues to deploy yuan funds: banker

(SINGAPORE) The lack of avenues to repatriate funds into China is preventing the 'dim sum' bonds market in Hong Kong from growing faster, says a senior officer from Hong Kong's Bank of East Asia (BEA).

Brian Li, deputy chief executive of BEA, noted that dim sum bonds - which yuan-denominated bonds in Hong Kong came to be known as - are popular with clients holding yuan deposits.

But corporates that issue dim sum bonds need to find ways to deploy these yuan funds, provided they get approval from China to remit money back onshore or they are trading firms that could undertake trade settlements in yuan.

'I think what would really drive the market further is if we can see a clear path of renminbi repatriation into the interbank bond market in China,' Mr Li told BT. 'Right now, the problem is there are a lot of deposits, but there are not enough assets for the banks to get their hands on.'

Mr Li was in Singapore for BEA's inaugural Corporate Development Day here last Friday, where 150 clients and business associates were invited.

BEA now accounts for 5 per cent of the total yuan deposits in Hong Kong, which according to official estimates stood at 510.7 billion yuan (S$97.4 billion) as at April.

China's securities regulator had announced earlier this year that it was preparing to trial-run a mini-QFII (qualified foreign institutional investor) scheme in Hong Kong, a quota system to allow offshore yuan raised by overseas fund managers to be invested in mainland stocks and bonds. This is different from the original QFII, which allows those same investors to convert foreign currencies into yuan to invest in China.