BEIJING (Bloomberg) — China's manufacturing expanded in July at the fastest pace in more than two years, signaling a pickup in economic growth is strengthening amid government support policies.

The Purchasing Managers' Index was at 51.7, the National Bureau of Statistics and China Federation of Logistics and Purchasing said Friday in Beijing, exceeding the median 51.4 estimate in a Bloomberg News survey and up from 51.0 in June. A separate PMI from HSBC Holdings Plc and Markit Economics rose to an 18-month high of 51.7. Readings above 50 indicate expansion.

The data signal the world's two largest economies are gaining momentum, after the U.S. this week reported a 4 percent pace of expansion in the second quarter. Confidence in China's outlook drove the nation's benchmark stock index to a seven- month high this week, even as a property-market slump deepens and credit risks rise.

"The economy is clearly improving, driven mostly by government infrastructure investment" including railways and subways, Shen Jianguang, chief Asia economist at Mizuho Securities Asia Ltd. in Hong Kong, said in an e-mail. "But the pickup in manufacturing may not be enough to counter a property slump," and the government will keep easing credit, fiscal and housing policies to achieve its growth goal of about 7.5 percent, Shen said.

Estimates for today's official PMI from 37 analysts ranged from 51.0 to 52.4. The report is based on responses to surveys sent to purchasing executives at 3,000 companies.

The HSBC-Markit PMI, which is based on a survey of more than 420 companies, compared with a preliminary reading of 52.0 issued on July 24, which was also the median estimate of analysts for today's final number. June's reading was 50.7.

The MSCI Asia Pacific Index fell, headed for its first weekly loss in three weeks, after U.S. stocks dropped overnight amid weaker earnings and credit-market concerns. The gauge was 0.6 percent lower at 10:50 a.m. in Tokyo. The Shanghai Composite Index rose 0.1 percent.

A gauge of output in today's official report jumped to 54.2, the highest reading since November, and a measure of new orders increased to 53.6, the highest since April 2012. Export orders rose for a third month to 50.8, the highest level since March 2013.

China's GDP rose 7.5 percent in the April-June period from a year earlier, the first acceleration in three quarters.

The improvement from a 7.4 percent pace in the first three months of the year came after the government ordered targeted stimulus including tax cuts for small companies, and speeding up public investment and fiscal spending. The central bank cut reserve requirements for some banks and turned to unconventional tools such as relending to boost credit.

The biggest short-term risk to the economy is real estate, Markus Rodlauer, mission chief for China at the International Monetary Fund, said on a conference call this week to discuss its annual report on the country. Prices and sales of residential properties are declining and inventories are rising, government data show. UBS AG estimates real estate accounts for more than a quarter of final demand in the economy.

Local authorities are starting to loosen curbs on home buying. Hohhot, capital of Inner Mongolia, became the first city to scrap restrictions in June, followed by eastern cities including Jinan, Wuxi, Wenzhou, Hangzhou and Ningbo.

A gauge of property stocks in Shanghai rose 11.5 percent in July, the biggest monthly gain since December 2012, on optimism the easing, along with prospects for reform of the household registration system, will spur sales. Poly Real Estate Group Co. climbed 2 percent yesterday while China Vanke Co., the biggest developer, added 2.8 percent.

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