China’s economy expanded 7.8 per cent in the third quarter from the same period a year earlier, marking an acceleration from the second quarter when it grew by 7.5 per cent.

The rebound in the world’s second-largest economy was largely the result of government efforts to shore up growth with looser monetary policy and a “mini-stimulus” of investment in infrastructure such as rail and subway systems.

The strong reversal of China’s first-half slowdown will bring optimism to investors and exporters from Australia to Germany to Brazil and should shore up confidence following a quarter in which many developing markets were hammered by fears over potential tightening in US monetary policy.

But in a sign the rebound may not be sustained in the coming quarters, a raft of monthly data released on Friday by China’s National Statistics Bureau showed growth in industrial activity, retail sales and fixed asset investment slowed slightly in September from previous months.

Industrial production in September increased 10.2 per cent from a year earlier, down from 10.4 per cent expansion in August, while fixed asset investment and retail sales both decelerated slightly to grow by 20.2 per cent and 13.3 per cent respectively.

“We expect this fading in momentum to extend into the fourth quarter and 2014. Our view has been that the strong acceleration in industrial activity in July-August would not be sustained, as it reflected restocking and a temporary acceleration in infrastructure investment,” said Jian Chang, an economist at Barclays, before Friday’s data release.

“The Chinese economy faces various fundamental challenges, including industrial overcapacity, financial and fiscal risks, a latent property bubble and a falling potential growth rate.”

Growth in the Chinese economy has decelerated in 11 of the past 14 quarters, falling from an expansion rate of nearly 12 per cent at the start of 2010.

In 2012, China grew 7.8 per cent for the whole year, the slowest pace in 13 years.

If the rate drops below 7.6 per cent for all of this year it will be the economy’s worst performance since 1990, when the country faced international sanctions following the 1989 Tiananmen massacre.

Other data from last month including the closely watched purchasing manager’s index, electricity consumption and exports all disappointed, with exports contracting 0.3 per cent from a year earlier, compared with 6 per cent average growth in the preceding two months [Guangzhou Company Registration].

Still, the strong rebound in the third quarter has boosted confidence that Beijing can avoid a disorderly “hard landing” for an economy that is still expanding at a rate that is the envy of almost every other country in the world.

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