October 17, 2013 / 7:10 PM / 4 years ago

China's third-quarter GDP growth seen fastest this year, but outlook murky

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BEIJING (Reuters) - China's economy probably grew at its fastest pace in three quarters between July and September as firmer foreign and domestic demand lifted factory production and retail sales.

Yet any optimism from the government figures due later on Friday could fade quickly as global demand remains volatile and efforts at home to engineer slower but more sustainable growth could cut the rebound short.

After three decades of blistering expansion fuelled by exports and investment, Beijing is trying to shift the economic mix so that activity is geared much more to consumption. That means a slowdown from the double-digit growth of previous years.

Analysts polled by Reuters expect the world's second-largest economy to have grown 7.8 percent in the third quarter from a year earlier, picking up from 7.5 percent in the previous three months.

That would keep China on track to achieve the government's growth target of 7.5 percent this year, much stronger than other major economies but still the worst performance for the country in 23 years.

"September data will confirm a near-term growth stabilisation theme," Jian Chang and Joey Chew, economists at Barclays, said in a note. "That said, we expect some slowdown in the fourth quarter."

The GDP figures will add to September monthly data. Annual growth in factory output is expected to have edged down slightly to 10.1 percent from 10.4 percent in August, while retail sales are forecast to be little changed at 13.5 percent.

Fixed asset investment, a crucial driver of growth, is expected to have risen 20.3 percent in the first nine months compared to the same period a year ago, unchanged from the pace seen between January and August.

The fragility of China's economic revival was underscored last week when data showed September's exports fell 0.3 percent from a year earlier, in stark contrast to expectations for a 6 percent rise.

Weaker demand in southeast Asia had driven the surprise drop in exports, as fears of possible U.S. monetary policy tightening led investors to retreat from emerging markets, thereby bruising consumer confidence and demand for Chinese goods.

With China's economic pick-up so shaky, most economists believe Chinese authorities are likely to stand still on monetary policy in the next year-and-a-half. But at the same time, few believe Beijing would dramatically loosen policy to aid growth, barring a sharp downturn.

Reporting by Koh Gui Qing

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