* July official PMI at 51.7, highest since April 2012
* New orders grew fastest since May 2012
* Shows economy regaining strength on policy support
BEIJING, Aug 1 Activity in China's vast factory
sector expanded at the fastest pace in 27 months in July on
stronger demand, a government survey showed, adding to evidence
that the economy is regaining momentum after a burst of
government stimulus measures.
China's official manufacturing purchasing managers' index
(PMI) rose to 51.7 in July - the strongest since April 2012 and
up from 51 in June, the National Bureau of Statistics said on
Friday. Economists had expected a reading of 51.4.
A number above 50 indicates an expansion in activity while
one below that level points to a contraction.
The official survey showed a broad-based recovery in
manufacturing activity in July, with 10 out of the 12
sub-indicies pointing to improvement from the previous month.
A sub-index for new orders, a measure of both foreign and
domestic demand, edged up to 53.6 in July from 52.8 in June,
marking the highest level since May 2012.
Export orders climbed to 50.8 in July from 50.3 in June,
indicating a modest pick up in global demand.
As one of the leading indicators that help gauge economic
momentum, the official PMI data is closely watched by the market
and an improvement in the reading could bode well for other July
Zhang Liqun, an economist at the Development Research
Centre, said in the statement: "this indicates that a shift from
a slowdown to stabilisation in economic growth has been fully
formed and the trend will continue for a period of time."
A preliminary PMI survey released last week by HSBC and
Markit showed that rising new orders had lifted growth of
factory sector activity to a 18-month high in July.
The government has unveiled a series of modest stimulus
measures since April, including targeted reserve requirement
cuts for some banks and hastening construction of railways and
public housing projects, to give a lift to economic growth,
which dipped to a 18-month low in the first quarter.
In response, economic growth quickened to 7.5 percent in the
second quarter from a 18-month low of 7.4 percent between
January and March.
Some economists say the economic recovery still hinges on
the magnitude of Beijing's pro-growth steps and whether the
government can successfully curb the risks stemming from a
cooling property sector.
The real estate industry is undergoing a downward correction
after rising for nearly two years, with home prices, property
sales and new construction all dipping, in what analysts
describe as the biggest threat to the world's second-largest
Local governments have recently scrambled to relax home
purchase restrictions in hopes of reviving the struggling
sector, which contributes a hefty amount of their revenues.
So far, at least 20 regional governments in small to
mid-sized cities have openly or quietly lifted bans on the
number of homes that people are allowed to buy.
China's top leadership pledged on Tuesday that it would
focus more on targeted measures to help shore up the economy,
while keeping macro economic policies stable and consistent.
(Reporting by Kevin Yao; Editing by Kim Coghill)