China’s COVID cases highest since August, Beijing vows to stay the course

BEIJING, Nov 3 (Reuters) – China’s COVID-19 cases hit their highest level in two and a half months on Thursday after the health authority stuck to its strict lockdown policy, dampening hopes for investors of an easing of the brakes which are hitting the world’s second-largest economy.

Dejected Chinese stocks had soared this week on speculation that Beijing would ease its “zero-COVID momentum” policy, despite rising case numbers and reiterations of a stance that casts China as an extreme outlier. almost three years after the start of the pandemic.

The impact of restrictions continued to be felt as a leading survey showed services activity contracted further in October due to the impact of COVID restrictions on business and consumption.

The Caixin index of services purchasing managers fell to 48.4, the lowest since May, from 49.3 in September.

With zero-COVID lockdowns hitting major cities, some of China’s wealthier regions are proving to be a drag on the recovery, growing slower than the national economy in the first three quarters, data shows. Until wednesday.

Stocks in Hong Kong and China fell, ending a two-day rally as confidence was hit by rising COVID numbers and expectations that the Federal Reserve would continue to raise interest rates Americans.

“There may be some easing on zero-COVID, but temper your expectations, Nomura analysts wrote, adding that “true reopening” only becomes more likely after March, when China completes a transition. politics culminating with its annual parliamentary rally.

Nomura estimated that a population representing 10.1% of China’s gross domestic output was under control, up from 9.5% on Monday.

Any short-term COVID policy adjustment “could be more than offset by a tightening of local government grip, as officials build on last month’s 20th Party Congress meeting,” Nomura wrote.

DISAPPOINTED HOPES

Investors hope that last month’s congress of the ruling Communist Party, which will span two decades, will mark an important milestone after which China could lay the groundwork to begin returning to zero-COVID. They were disappointed when Xi Jinping, who won a third term in the leadership, reiterated the validity. of the approach.

This week, investor optimism returned even as Beijing showed no signs it was preparing for any significant easing, such as undertaking mass recall campaigns, greenlighting foreign mRNA vaccines or modifying the message that sowed extreme fear of catching COVID.

In its first comments after the congress, the National Health Commission said Wednesday that authorities were working to control a sudden outbreak of COVID as quickly as possible. The nation should steadfastly stick to zero-COVID, the commission said.

China reported 3,200 local cases of COVID-19 on Thursday, the first count above 3,000 since August 17.

Lenovo, the world’s largest personal computer maker, said revenue from China fell 12% in the July-September quarter as COVID restrictions weighed on demand.

FIH Mobile (2038.HK), a unit of Apple provider Foxconn (2317.TW) said on Wednesday zero-COVID was a key reason it was likely to post a full-year loss as as its parent company continues to battle a lockdown around its large iPhone factory in central China that has fueled worker discontent.

Electric vehicle maker Nio (9866.HK), on the other hand, resumed production at its two factories, a day after announcing it had suspended work due to COVID measures.

Reporting by Liz Lee and Albee Zhang; Additional reporting from Beijing and Shanghai newsrooms; Written by Tony Munroe; Editing by William Mallard

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