The tally of survivors from the sinking of a coastal ferry in Papua New Guinea reached 238, with no reports of bodies being pulled from the water.

The MV Rabaul Queen went down 16km off Finschhafen while sailing from the island of Kimbe to Lae.

Papua New Guinea's Maritime Rescue Coordination Centre spokesman Nerae Mari Mahu estimated the number of passengers on board at between 300 and 350, but said the vessel's owners , Rabaul Shipping, were yet to produce the relevant documents.

"We're optimistic the rescue will go well," she said. "We won't rest until everyone is accounted for."

China's official Xinhua news agency reported that a Chinese vessel had rescued up to 29 people from the sea.

The rescue centre was relying on the logistics of the Australian Maritime Safety Authority for the coordination of the rescue.

The authority's Jo Meehan said eight vessels were at the scene, along with three helicopters. Australian aircraft also dropped life rafts to those in the sea.

The authority said that earlier reports of fine weather conditions had been contradicted.

"There are currently strong northwesterly winds at 40 knots and a 5m sea swell," the authority said.