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UPDATE 1-Industry survey shows China economy gaining strength

 (Adds reaction)
 BEIJING, May 1 (Reuters) - Chinese manufacturing gained
further momentum last month, a survey showed on Friday, adding
to tentative evidence from around the world that the global
economy may soon be on the path to recovery.
 An index based on an official survey of executives in
charge of purchasing in industries across China rose to 53.5 in
April from 52.4 in March, reflecting strength in output and new
orders.
 The survey is carried out by the China Federation of
Logistics and Purchasing on behalf of the National Bureau of
Statistics.
 It was the fifth month in a row that the Purchasing
managers' Index has improved and the second straight month in
which the index has been above the watershed of 50.
 A reading over 50 indicates an expansion of activity in the
manufacturing sector while one below 50 suggests contraction.
 Sub-indexes for employment, imports and input prices all
clawed their way back to the boom-bust mark, or beyond, for the
first time in months.
 "The April PMI indicates that the Chinese economy will keep
recovering, a trend seen in the figures for investment,
consumption and export growth in the first quarter," said Zhang
Liqun, a researcher at the State Council's Development Research
Centre think-tank.
 In comments provided by the logistics federation, Zhang
said the PMI has been signalling that the economy has reached a
turning point and will become a very important advance
indicator for growth.
 The reading is now well above a record low of 38.8 plumbed
in November, responding to aggressive fiscal and monetary
stimulus from Beijing..
 "While a fifth monthly improvement in the PMI reinforces
our confidence that the Chinese economy is starting to turn
around, it appears sensible to guard against excessive
optimism," said Jing Ulrich, chairman of China equities for
J.P. Morgan in Hong Kong.
 With a sizeable inventory surplus weighing on heavy
industries, output could stay at moderate levels while final
demand gradually gathers strength, she said in a note to
clients.
 "Month-on-month and quarter-on-quarter improvements in
economic indicators will be difficult to maintain and the
pathway to recovery will not be entirely smooth," Ulrich
commented.
 Following is a breakdown of the purchasing managers' index:
                           Apr   Mar   Feb   Jan   Dec  
Nov
  Oct
 Overall PMI                 53.5  52.4  49.0  45.3  41.2 
38.8
 44.6
 Output                      57.4  56.9  51.2  45.5  39.4 
35.5
 44.3
 New orders                  56.6  54.6  50.4  45.0  37.3 
32.3
 41.7
 New export orders           49.1  47.5  43.4  33.7  30.7 
29.0
 41.4
 Backlogs of orders          48.9  48.8  44.2  39.2  35.8 
36.0
 40.7
 Stocks of finished goods    44.8  46.7  47.7  43.5  44.7 
50.8
 51.4
 Quantity of purchases       56.2  54.0  49.5  44.3  36.2 
34.2
 42.4
 Imports                     50.0  48.8  41.8  39.9  33.3 
32.2
 39.4
 Input prices                51.3  48.3  46.5  41.5  32.7 
26.6
 32.3
 Stocks of purchases         46.9  47.5  45.6  43.9  40.6 
39.5
 42.6
 Employment                  50.3  48.6  46.1  43.0  43.3 
44.3
 47.0
 Suppliers' delivery times   50.6  51.3  51.3  50.6  50.4 
50.7
 50.8
 (Reporting by Langi Chiang and Alan Wheatley; Editing by Jan
Dahinten)



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