World Economy

Data blitz shows China in better state than expected

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China entered the fourth quarter on a stronger-than-expected footing, according to a flurry of data released over the weekend, with the world's number two economy appearing to defy expectations for a slowdown in the final quarter of the year.

The economic figures showed growth in industrial production, retail sales and fixed asset investment powering holding up in October. Meanwhile, export data published last Friday indicated a rebound in shipments in the same month.

"The recovery momentum is slightly stronger and more sustainable than what markets had expected, inflation is still not a threat, and the Street may need to slightly revise up their [fourth quarter] GDP [gross domestic product] growth forecasts," said Ting Lu, chief China economist at Bank of America Merrill Lynch.

"October macro data should be on the whole positive for market sentiment," he added.

(Read more: China exports rebound in October after surprise slump)

China's economy, which grew by 7.8 percent in the third quarter, is expected to slow to around 7.5 percent in the final three months of the year as the impact of fiscal stimulus measures unveiled in July fades.

However, the acceleration in industrial production growth to 10.3 percent on-year – from 10.2 percent in the previous month and above expectations for a rise of 10 percent – poses an upside risk to fourth quarter growth forecasts, said economists.

"Industrial production growth...was against our and market expectations of a further moderation. The resilience reflects better-than-expected demand. (It) also suggests small upside risks to our fourth quarter GDP growth forecast of 7.5 percent and our full-year 7.6 percent forecast," said Jian Chang, China economist at Barclays.

(Read more: Many Americans seeChina as dominant economic power)

The data release came as top leaders of China's ruling Communist Party convened Saturday for a key meeting, known as the Third Plenum, to set the economic and political agenda for the next decade. The four-day meeting, which is cloaked in secrecy and held under tight security, will conclude on November 12.

World Bank: China growth model a thing of the past

Still, chief China economist at Nomura Zhiwei Zhang, remains skeptical that the economy will maintain its growth momentum. He said political pressures to deliver good macro numbers will lessen after the meeting. Zhang expects growth to slow to 7.5 percent in the fourth quarter, and 6.9 percent in 2014.

"We expect the government to cut its GDP growth target for 2014 to 7 percent from 7.5 percent for 2013. This decision will likely be made at the Central Economic Working Conference in December," he added.

Zhang and Haibin Zhu, chief China economist at J.P. Morgan, both believe China's recovery peaked in the third quarter. Zhu points out that infrastructure and real estate investments, which have been the major drivers of economic growth, started to cool off in recent months and could be a drag on the strength of a rebound going ahead.

(Read more: Xi confident aboutChina's healthy economic growth)

The pace of fixed investment growth moderated slightly to 20.1 percent in the first ten months of 2013, from 20.2 percent in the first nine months of the year.

"Despite the rebound in the third quarter, structural problems in the Chinese economy showed no improvement, and some may have even got worse," Zhu said.

"Investment contribution to the GDP growth rose further to 56 percent in the first nine months of the year, consumption growth softened and the growth of disposable income of urban households fell behind GDP growth, and credit growth continued to outpace nominal GDP growth by a wide margin," he added.

—By CNBC's Ansuya Harjani; Follow her on Twitter: @Ansuya_H