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China shares slip as cash rates rise, Hong Kong sluggish

* HSI +0.4 pct, H-shares flat, CSI300 -0.9 pct

* Chinese banks sink after PBOC cash drain

* Zijin Mining spikes on soaring gold prices

* Vanke soars after approval for B to H share transfer

HONG KONG, March 4 (Reuters) - China shares slipped early on Tuesday, capping Hong Kong gains, with banks among the biggest index drags as cash rates rose following the central bank's use of a 28-day instrument for the first time since June to drain funds.

If losses hold, this would be the first loss for the Shanghai Composite Index in five days ahead of the National People's Congress that starts in Beijing on Wednesday, where policy targets for the year are expected to be announced.

At midday, the Shanghai Composite Index was down 0.8 percent in lacklustre volumes, while the CSI300 of the largest Shanghai and Shenzhen A-share listings fell 0.9 percent.

The Hang Seng Index rose 0.4 percent to 22,592 points, while the China Enterprises Index of the leading offshore Chinese listings in Hong Kong was flat. The mood remained rather cautious in global markets, with investors eyeing the Ukraine-Russia situation warily.

"At this point, there is little reason for people to be too active in the market. There's the Ukraine situation and some have positioned for the meetings in China, in anticipation of supportive policies," said Jackson Wong, vice president for equity sales at Tanrich Securities.

Shares of China's largest gold miner Zijin Mining climbed 3.5 percent in Hong Kong and 0.8 percent in Shanghai as gold prices hit a four-month high after Russia's military intervention in Ukraine triggered a flight to safety.

Mid-sized lenders Ping An Bank sank 1.8 percent in Shenzhen and Industrial Bank shed 0.9 percent in Shanghai after the benchmark short-term money rates in the mainland jumped more than 100 basis points.

With a net 108 billion yuan ($17.6 billion) in repos expected to mature this week and the seven-day repo rate lingering at 2.4 percent at Monday's close - its lowest in nearly a year - the Chinese central bank drained 85 billion yuan via forward repos on Tuesday at its first of two weekly scheduled open market operations.

The seven-day repo rate rose to about 3.5 percent, still a long way off the 6.6 percent high in January or the 8.9 percent peak in December. The PBOC used the 14-day repo to withdraw 35 billion yuan and the 28-day repo to remove 50 billion yuan.

China Vanke gained after the country's largest real estate developer by sales said it now has regulatory approval to move its B-share listing to Hong Kong, more than a year after the plan was first mooted.

Vanke's A-share listing jumped 3.2 percent in Shenzhen, while its B-share listing surged the maximum 10 percent.

Forgame soared 6.1 percent to its highest since mid-January in Hong Kong after the Chinese gaming company announced its $70 million stake acquisition in unlisted sector peer Magic Feature.