China’s economy surged ahead by 11.5 per cent in the third quarter, slowing slightly from a 12-year high of 11.9 per cent in the previous three months but still putting China on track to overtake Germany to become the world’s third largest economy before the end of the year.

That growth was fuelled by a double-digit increase in exports as well as investment in factories and other fixed assets that seems almost unstoppable despite repeated interest rate rises. The People’s Bank of China has raised interest rates five times this year, and economists expected at least one more increase this year.

The vibrant economy is a point of pride for the ruling Communist Party, which must find jobs for tens of millions of workers laid off by struggling state-owned enterprises, satisfy the demands of a growing middle-class and narrow a widening wealth gap between more prosperous city dwellers and farmers left behind in the race to riches.

Li Xiaochao, the spokesman of the National Bureau of Statistics (NBS), said that with annual gross domestic product (GDP) advancing at such a clip, China should have no difficulty meeting a target set by President Hu Jintao at last week’s five-yearly Party Congress to quadruple per capita GDP between 2000 and 2020. To achieve that goal, China needed annual GDP growth of 5.4 per cent – well below the current average. Indeed, China’s GDP could well grow this year at its fastest rate since 1993.

Chen Xindong, chief economist at BNP Paribas Peregrine in Beijing, said: “Industrial output remains very robust. It remains on an upward trend and there is no sign of it coming down. External demand is still very strong. High growth is still necessary. It's not because the government wants it, it's because organic demand is still very strong.” He cited industrialisation, urbanisation and China’s global manufacturing power as the three engines driving high growth.

For the first time this year, China will contribute more than the United States to global growth, according to the International Monetary Fund.

Mr Li, the NBS spokesman, was pleased with the tiny easing in growth. “Due to macro-economic controls, we have turned the economy from being an overheating one to being one of speedy growth.”

However, he was far from complacent, saying problems facing the economy were pronounced, with growth and inflation still too high. Annual consumer inflation slowed to 6.2 per cent in September from a decade high of 6.5 per cent the month before. That was still well above the government target of 3.0 per cent for the year. Officials have blamed the inflation surge on a shortage of food items, especially pork, the country's staple meat. They say prices should ease in coming months as government efforts to increase food supplies take effect.

Another factor is rising consumption, which has long faltered in the doldrums and which the government has been struggling to improve. Mr Li said: “This year, consumption has grown fairly quickly. The reason for this is peoples' incomes are growing quickly. As incomes grow, consumption will naturally pick up."

And with exports surging China is likely to see yet more pressure to allow its currency, the yuan, to appreciate more swiftly. It climbed to a post-revaluation high against the dollar for a second day yesterday (Thursday), guided by the central bank’s setting of a higher daily reference rate. It was again trading above 7.50 – a level it breached for the first time on Wednesday -- at around 7.4850.

Goldman Sachs said: “We recognise the likelihood of a major change in exchange rate policy in the near term is low and we expect the central bank to continue to depend on credit rationing as its main policy tool."

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