April 26, 2017 / 8:38 AM / 4 months ago

China factory sector expansion seen slowing in April

Chinese national flags are flying near a steel factory in Wu'an, Hebei province, China, February 23, 2017. Picture taken February 23, 2017. Thomas Peter

BEIJING (Reuters) - The pace of expansion in China's manufacturing sector likely slowed in April, a Reuters poll showed, as factory-gate price lost steam and authorities moved to tackle risks in the property market and credit growth.

The official manufacturing Purchasing Managers' Index (PMI) CNPMIB=ECI is expected to come in at 51.6, which would be the ninth straight month of expansion, according to a median forecast of 25 economists in the Reuters poll.

In March, the index hit 51.8, its highest reading in nearly five years.

The world's second-largest economy grew a faster-than-expected 6.9 percent in the first quarter, boosted by higher government infrastructure spending and a gravity-defying property boom.

But growth is expected to lose steam as authorities step up a battle to cool the property sector while the central bank and banking regulator have take steps to contain financial risks.

"Producer price inflation is cooling and strict financial supervision could affect funding for investment," said Zhang Yiping, an economist at Merchants Securities in Shenzhen.

The central bank is expected to guide short-term interest rates higher, and step up its oversight of the financial sector, amid a crackdown on banks' shadow banking businesses.

Some analysts believe China's economic growth may have peaked in the first quarter but it's on track to hit a target of around 6.5 percent this year.

China's producer price inflation cooled for the first time in seven months in March as iron ore and coal prices tumbled, while property sales growth slowed in the first quarter despite robust property investment.

The housing boom has been a key driver of China's stronger-than-expected economic performance in recent months, but analysts believe it may also pose the single biggest risk to growth this year.

Local governments are adopting ever tougher measures to rein in prices, which are expected to eventually slow real estate investment and construction.

The official PMI number will be released on April 30, along

with the official services PMI CNPMIN=ECI.

The private Caixin/Markit PMI manufacturing survey CNPMIC=ECI, which focuses more on small and mid-sized firms, will be published on May 2. The Caixin/Markit PMI is expected to come in at 51.0 for April, according to a Reuters poll of economists, down from 51.2 in March.

Reporting by Kevin Yao; Polling by Shaloo Shrivastava and Jing Wang; Editing by Sam Holmes

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