UPDATE 1-China health sector sees better sentiment from anti-graft drive - execs

(Updates with AstraZeneca comment, paragraph 7)

By Andrew Silver

SHANGHAI, Nov 9 (Reuters) - Business activities in China's healthcare sector are returning from a sudden near freeze that began in July when Beijing kicked off a year-long anti-corruption campaign, two foreign industry executives said.

The campaign targets the bribing of doctors in drug and medical equipment sales and marks a sharp escalation of an anti-corruption drive in the sector that started years ago. The latest campaign has sent a chill through the sector, pummeling healthcare stocks and prompting some firms to cancel IPOs.

"We see a recovery in terms of engagements ... we see an improvement in that area," Zafer Unluer, China president of U.S. healthcare company Organon, told Reuters on the sidelines of an industry event in Shanghai.

"It is still as not high as before, but we see a bit of a balancing act."

The anti-graft drive initially caused huge business disruptions and many multinational pharmaceutical firms lost engagement with hospitals, executives said.

"We’ve seen some disruption in the ability of our medical representatives to visit hospitals, in our ability to implement some medical application activities," Larry Merizalde, China CEO of South African drugmaker Aspen, told Reuters.

AstraZeneca, the largest foreign drugmaker in China, said on Thursday sales in China grew just 1% in the third quarter, partly impacted by "reduced promotional activities following the government campaign announced at the end of July".

The two executives said the overall mood, however, had improved over the past two months following communications such as a National Health Commission Q&A and a presentation from a government official.

"Over the last month, since the latest announcements from the government to clarify the objectives of this anti-corruption policy, we see that overall activities are coming back to normal," Merizalde said.

China is one of the biggest healthcare markets for global healthcare companies but their business sentiment has turned fragile this year due to factors including the anti-graft drive. (Reporting by Andrew Silver; Editing by Miyoung Kim, Robert Birsel)