China stocks closed higher on Wednesday as investors took comfort in signs of lower domestic COVID-19 infections, while U.S. President Joe Biden's decision to consider eliminating Trump-era tariffs on Beijing further lifted risk appetite.

 

The blue-chip CSI300 index ended 1.4% higher at 3,976.42, while the Shanghai Composite Index gained 0.8% to 3,058.70 points.

** Shanghai said on Wednesday half the city had achieved "zero-COVID" status, but uncompromising restrictions had to remain in place under a national policy. Meanwhile, new cases detected in Beijing dropped to the lowest level since April 26.

** The head of the World Health Organization said on Tuesday China's zero-tolerance COVID-19 policy is not sustainable given what is now known of the virus.

** "Over the past week, the COVID-19 situation has continued to improve at the national level," said Nomura in a note. "However, the turning point for economic fundamentals and most financial assets in coming weeks (or months) depends mainly on Beijing's stance on zero-COVID strategy instead of daily cases."

** Lifting market sentiment further, China's producer prices rose at the slowest pace in a year in April, despite the surge in global commodity costs, leaving room for more stimulus to shore up the flagging economy.

** Risks affecting China's onshore market are controllable, and the market has solid foundation for stable operation, the official CCTV reported on Tuesday, citing a securities regulatory official.

** Biden, under pressure to tame high inflation, said he was considering eliminating Trump-era tariffs on China as a way to lower prices for goods in the United States.

** China equities could be approaching the late stage of a bear market, but the potential final leg is likely to be bumpy, Morgan Stanley strategists said in a note.

** The bank expected near-term market volatility to remain elevated, citing China's COVID-19 situation, geopolitical tensions, global macro slowdown, and monetary tightening.

** New energy firms jumped more than 4% to lead the gains, with battery giant CATL up more than 8%. Semiconductors and machinery stocks also went up more than 3% each.

(Reporting by Shanghai Newsroom; editing by Uttaresh.V)