UPDATE 1-China Nov factory growth unexpectedly picks up despite pollution crackdown


* China factory, service activity grows at solid clip

* Nov factory PMI at 51.8 vs forecast 51.4, Oct 51.6

* Output, new orders, export orders all rise at faster pace

* Gains may ease any concerns of sharp economic slowdown (Adds details)

BEIJING, Nov 30 (Reuters) - Growth in China's manufacturing sector unexpectedly picked up in November, despite a crackdown on air pollution and a cooling property market that have been widely expected to weigh on the world's second-largest economy.

The upbeat data should help ease concerns, for now, that Beijing's campaign to curb excesses in the financial sector and its war on smog could lead to a sharper-than-expected slowdown in China's economy.

The official Purchasing Managers' Index (PMI) released on Thursday stood at 51.8 in November, compared with 51.6 in October.

It remained above the 50-point mark that separates growth from contraction on a monthly basis for the 16th straight month.

Analysts surveyed by Reuters had forecast the reading would come in at 51.4, easing for a second straight month after September's more than five-year high.

Boosted by hefty government infrastructure spending, a resilient property market and unexpected strength in exports, China's manufacturing and industrial firms have been a major driver behind the economy's forecast-beating growth of nearly 6.9 percent so far this year.

But October economic data disappointed analysts as investment, industrial output and export growth slowed, raising concerns that a long-expected slowdown had begun.

Some economists see fourth-quarter growth moderating to 6.6 percent, and slowing further to 6.4 percent in 2018.

A senior banking regulator said on Thursday that China's economy could face downward risks as soon as the first quarter next year as the economy struggles for sustainable growth in the face of government efforts to deflate asset bubbles.


For now, though, strong commodity prices are continuing boost the performance of industrial firms like steelmakers, which have cranked up production to cash in on robust profit margins.

While some mills, smelters and factories in northern provinces have been forced to curb output to reduce winter smog, there are signs that their counterparts in other parts of the country have ramped up output to gain more market share.

Profits for China's industrial powerhouses surged 25.1 percent in October, down only slightly from September's nearly six year high, as coal mining and other upstream sectors continued to benefit from high prices.

Earnings have been boosted by surging factory gate prices, though the latest survey showed input price gains slowed, with the reading at 59.8 compared to 63.4 in October and the lowest since July.

Output price gains also slowed, reflecting concerns that higher commodity prices have not trickled down to higher prices and profit margins for downstream industries.

The latest pollution closures come on top of ongoing government efforts to trim down and upgrade the country's bloated industrial sector by shutting down outdated capacity, which also has helped support producer prices.

A sub-reading for output rose to 54.3 in November from 53.4 the previous month as factories continue to expand production.

Readings for total new orders, new export orders and imports also quickened from October.

But the environmental crackdown is creating uncertainty for industrial firms, with an executive at the nation's largest integrated copper producer Jiangxi Copper saying costs are going higher as emissions standards rise.

Growth in China's services sector also picked up in November, continuing to show solid expansion, a sister survey showed.

The official non-manufacturing Purchasing Managers' Index (PMI) rose to 54.8 from 54.3 in October.

A sub-reading for the construction sector rose to 61.4 from 58.5 in October.

The services sector accounts for over half of China's economy, with rising wages giving Chinese consumers more spending power.

China's leaders are counting on growth in services and consumption to rebalance their economic growth model from its heavy reliance on investment and exports. (Reporting by Elias Glenn; Editing by Kim Coghill)