China economy weakens further but markets pare losses

China's economy grew at its weakest pace since the global financial crisis in July-September, official data showed Monday, fuelling speculation Beijing will unveil fresh stimulus measures.

The figures were slightly better than expected, providing some buying support to Asian equities, with the Shanghai stock index adding to earlier gains, while other markets and emerging currencies pared losses.

Support also came from hopes a US interest rate rise will be put back to next year.

The National Bureau of Statistics (NBS) said growth came in at 6.9 percent, the weakest since 2009 at the height of the global recession but better than the 6.8 percent tipped by analysts in an AFP survey.

The result is the first official confirmation of investors' fears over growth in the world's number two economy and follows a string of weak indicators including on trade and manufacturing activity.

The economy is forecast to grow this year at a slower pace than last year's 7.4 percent, which was the worst annual rate in almost a quarter of a century.

An NBS spokesman described the decline as a "slight slowdown" but said the economy was still running within a "proper range". Beijing has set a target of "around seven percent" for growth this year.

As the world's biggest trader in goods and a giant market in itself, China is a key driver of the global economy, and stock exchanges around the world have been pummelled in recent weeks by concerns over its future.

Global indices were sent into freefall in August -- wiping trillions of dollars off valuations -- when Beijing announced a shock devaluation of its yuan currency, which fuelled fears about the economy and leaders' grip on the crisis.

However, investors took some positives from Monday's report, hoping the government will further loosen monetary policy after five interest rate cuts since November.

- 'Still sluggish' -

"Sentiment is positive on hopes for some more stimulus as the growth number beats the estimate but it's still less than the government target," Yen Chiu, a Hong Kong-based trader at Shenwan Hongyuan Group, told Bloomberg News.

"The market won't be as volatile as before with investors' confidence on the mend."

However, ANZ Banking Group chief economist for Greater China Liu Ligang told AFP: "China's economic growth is still sluggish with many risks remaining unresolved. We should not be over-optimistic. China's economic growth will continue to slow down." Liu estimated GDP would expand 6.4 percent next year.

In morning trade Shanghai was 0.70 percent higher and Sydney, where several firms with close links to China are listed, added 0.15 percent.

Hong Kong was flat, while Tokyo and Seoul all reduced earlier losses, with profit-takers weighing on prices after a recent rally.

Higher-yielding, riskier, currencies also improved. The South Korean won was up 0.69 percent, Australia's dollar was 0.24 percent higher, the Indonesian rupiah added 0.11 percent and India's rupee edged up 0.02 percent.

Malaysia's ringgit halved initial losses.

World equities have seen healthy gains this month after suffering their worst quarter in four years during July-September, with dealers buoyed by expectations the Federal Reserve will delay an interest rate hike until next year.

After saying in early 2015 that a rise was expected as the US economy picked up pace, bank policymakers have gradually lowered their expectations, with turmoil unleashed by China's yuan depreciation in August playing a major role.

A recent run of weak data out of Washington -- including below par jobs growth and retail sales -- have also muddied the Fed's waters.