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* 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 (Reuters) - 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 indicators.

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 economy.