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BEIJING, Nov 24 (Reuters) – China reported record high COVID-19 infections on Thursday, with cities nationwide imposing localised lockdowns, mass testing and other curbs that are fuelling frustration and darkening the outlook for the world’s second largest economy.

The resurgence of infections, nearly three years after the pandemic emerged in the central city of Wuhan, casts doubt on investor hopes for China to ease its rigid zero-COVID policy soon, despite recent more targeted measures.

The curbs are taking a toll on locked-down residents as well as output at factories, including the world’s biggest iPhone plant, which has been rocked by clashes between workers and security personnel in a rare show of dissent.

“How many people have the savings to support them if things continually stay halted?” asked a 40-year-old Beijing man surnamed Wang who is a manager at a foreign firm.

“And even if you have money to stay at home everyday, that’s not true living.”

The streets of Chaoyang, the capital’s most populous district, have been increasingly empty this week.

Sanlitun, a high-end shopping area, was nearly silent on Thursday but for the whirring of the e-bikes of delivery riders ferrying meals for those working from home.

Brokerage Nomura cut its China GDP forecast for the fourth quarter to 2.4% year-over-year from 2.8%, and cut its forecast for full-year growth to 2.8% from 2.9%, which is far short of China’s official target of about 5.5% this year.

“We believe re-opening is still likely to be a prolonged process with high costs,” Nomura wrote, also lowering its China GDP growth forecast for next year to 4.0% from 4.3%.

China’s leadership has stuck by zero-COVID, a signature policy of President Xi Jinping, even as much of the world tries to co-exist with the virus, saying it is needed to save lives and prevent the medical system from being overwhelmed.

Acknowledging pressure on the economy, the cabinet said China would use timely cuts in bank cash reserves and other monetary policy tools to ensure sufficient liquidity, state media said on Wednesday, a hint that a cut in the reserve requirement ratio (RRR) may come soon.

WIDESPREAD OUTBREAKS

Wednesday’s 31,444 new local COVID-19 infections broke a record set on April 13, when the commercial hub of Shanghai was crippled by a city-wide lockdown of its 25 million residents that would last two months.

This time, however, big outbreaks are far-flung, with the biggest in the southern city of Guangzhou and southwestern Chongqing, although hundreds of new infections are reported daily in cities such as Chengdu, Jinan, Lanzhou and Xian.

While official case tallies are low by global standards, China tries to stamp out every infection chain.

It recently began loosening some norms on mass tests and quarantine, as it looks to avoid catch-all measures such as city-wide lockdowns such that on Shanghai this year.

Recently, cities have been using more localised and often unannounced lockdowns. Many people in Beijing said they had recently received notices about three-day lockdowns of their housing compounds.

The far northeastern city of Harbin announced lockdowns of some areas on Thursday.

Many cities have returned to mass testing, which China had hoped to cut back as costs rise. Others, including Beijing, Shanghai and Sanya on the resort island of Hainan have limited movements of recent arrivals.

Nomura estimates that more than a fifth of China’s GDP is under lockdown, a share bigger than the British economy.

“Shanghai-style full lockdowns could be avoided, but they might be replaced by more frequent partial lockdowns in a rising number of cities due to surging COVID case numbers,” its analysts wrote.

The central city of Zhengzhou, where workers at the massive Foxconn factory that makes iPhones for Apple Inc staged protests, announced five days of mass testing in eight districts, becoming the latest city to revive daily tests for millions of residents.

(Reporting by Beijing and Shanghai newsrooms; Writing by Bernard Orr; Editing by Tony Munroe and Clarence Fernandez)

NEW YORK, Nov 23 (Reuters) – When Federal Reserve officials met at the start of the month to weigh another rate increase, some of them were thinking about what the central bank might have to do should the Treasury market run into trouble.

Those concerns were aired in meeting minutes for the rate-setting Federal Open Market Committee’s Nov. 1-2 policy meeting, released Wednesday. Then, officials pressed forward with aggressive rate increases that are part of a campaign to lower the highest levels of inflation seen in 40 years.

The speed of Fed rate hikes, which have also been joined with ongoing central bank action to shed Treasury and mortgage bonds to contract the size of its balance sheet, have generated worries the Fed could break something in financial markets.

Thus far, the Treasury market, which serves as the backbone of the world’s credit system, has held together, although there has been ample concern about low liquidity that’s made trading difficult. Fed officials have thus far described the market as resilient.

“Participants observed that, despite elevated interest rate volatility and indications of strained liquidity conditions, the functioning of the Treasury securities market had been orderly,” the minutes said. Fed staff briefing officials concurred,

The minutes flagged recent events in Britain as a point of concern. There, the central bank was forced to intervene and buy bonds to restore market stability, in a policy that ran counter to the Bank of England’s overall effort to tighten, rather than loosen the stance of monetary policy. Some have worried the Fed might have to restart asset buying in the United States should some sort of trouble develop, and some in Congress have already warned the Fed not to go down this road.

According to the minutes, “a few participants noted the importance of being prepared to address disruptions in U.S. core market functioning in ways that would not affect the stance of monetary policy, especially during episodes of monetary policy tightening.”

The minutes, however, did not say what the Fed could do to calm markets in the face of trouble without taking action to buy bonds, as the central bank did in late 2019 and in the spring of 2020, when markets became unsettled.

Some observers have said a Fed tool called the Standing Repo Facility, which allows eligible firms to quickly convert Treasuries into cash loans, could be an important tool in restoring liquidity. That facility was adopted in the summer of 2021 and is as yet untested.

The minutes also said “several participants noted the risks posed by nonbank financial institutions amid the rapid global tightening of monetary policy and the potential for hidden leverage in these institutions to amplify shocks.”

The discussion on financial stability reflected in the minutes took place before the latest shocks to market stability emerging from the nonbank sector – specifically the cryptocurrency space. It was not until after officials had adjourned their meeting that crypto exchange FTX collapsed and filed for bankruptcy, and it appears that other failures are in the offing.

The Fed’s top financial stability official, Vice Chair for Supervision Michael Barr, last week told Congress he was worried about “blowback” to the wider financial system from crypto-related failures.

“We’re concerned about the risks that we don’t know about in the nonbank sector,” Barr told the Senate Banking Committee.

(Reporting by Michael S. Derby; Editing by Andrea Ricci)