BEIJING (MNI) - The Chinese government's quarterly data release underpinned the newfound emphasis on the threat posed by inflation as growth accelerated to its fastest pace since the outbreak of last year's global financial crisis.

The report from the National Bureau of Statistics showed the economy expanding by 8.9% in the third quarter and by 7.7% during the January-September period.

The report came just a day after the State Council effectively announced that it has moved off its crisis footing to focus on the quality of growth and address the abuses caused by a year-long, ultra-loose monetary policy stance.

But the changed wording means an eye on the exit strategy rather than a wholesale move towards it, and Li Xiaochao, a spokesman for the NBS, reiterated that policy biases will remain unchanged for now.

"The State Council said that we will continue with expansionary fiscal policy and appropriately loose monetary policy so this means there are no policy changes," he told reporters at a briefing here.

Bond traders said that neither GDP report nor the State Council statement had much of an impact, given that data had already leaked into the market and that at least one interest rate hike has already been priced in.

That move on rates could come during the second quarter of next year, HSBC advised clients, with the first step likely to be changes in the make-up of fiscal spending towards healthcare and education and away from infrastructure.

"There are limited risks of aggressive policy tightening in the near term given the still negative headline inflation readings," HSBC said. "The moderate change in policy tone implies that the faster recovery does leave more room for rebalancing growth and inflation."

The NBS' Li noted rising prices on an m/m basis and said that these constitute "inflation expectations and we should closely watch them."

(He ducked a question asking about the impact of U.S. dollar depreciation on domestic inflation rates but said that the greenback is "one of the external uncertainties that we are facing.")

Consumer price inflation narrowed further to -0.8% year-on-year in September from August's -1.2%, and is expected to turn positive by next month at the earliest.

Some analysts expect the government to begin tightening via the interbank market, such as by increasing gradually increasing the scope of its open market operations or by raising the amount of ratio of the reserves that lenders are forced to keep with the central bank as a proportion of total deposits.

Despite the change in wording, China's economy continues to be powered by fixed-asset investment, which rose 33.3% in urban areas during the first nine months.

Investment accounted for 7.3 percentage points of January-September growth while consumption made up 4.0 percentage points, the NBS said.

Within that, investment in real estate -- which many analysts take to be a proxy for private sector involvement in the economy -- rose 17.7% during the first nine months, up from just 1.0% in January-February.

Investment is being driven by the massive increase in bank lending this year, and September's monetary aggregates showed a banking system which has only slightly moderated its behavior from the average CNY1 trillion-plus being lent out every month during the first half.

Despite a robust housing market and steady retail sales growth, the trade sector remains the economy's Achilles' heel. Exports fell 15.7% in September, the ninth straight month of double-digit decline, and the State Council also warned that the economy's recovery has consolidated but remains unstable.

"The commentary appears more bearish than the economic data would imply," said Ben Simpfendorfer, an economist with Royal Bank of Scotland.

Government officials have also been warning in recent days about the inflationary threat posed by inflows of capital from abroad.

Those very public warnings suggest that two tools of monetary tightening -- higher interest rates and currency appreciation -- will be used only very carefully in order to avoid catalyzing further inflows of "hot money".

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