Oct. 15 (Bloomberg) -- China’s home prices rose at the fastest pace in a year in September and inflows of foreign direct investment quickened as a recovery gathered pace in the world’s third-biggest economy.

Home prices in 70 cities climbed 2.8 percent from a year earlier, the National Bureau of Statistics said on its Web site today. Foreign direct investment jumped 18.9 percent to $7.9 billion, the Ministry of Commerce said at a briefing in Beijing.

China may report next week that its economic growth accelerated to 8.9 percent in the third quarter, a Bloomberg News survey of economists shows. A record 8.67 trillion yuan ($1.27 trillion) of new loans this year, reported by the central bank yesterday, has added to the risk that the rebound is at the cost of asset bubbles, bad loans and resurgent inflation.

“There’s been a very impressive acceleration of growth,” said Dariusz Kowalczyk, chief investment strategist at SJS Markets Ltd. in Hong Kong. “Policy makers will gradually begin to be more concerned about asset-price inflation and the overall inflation outlook.”

China may raise interest rates and banks’ reserve requirements in the first quarter of 2010, Kowalczyk said.

The Shanghai Composite Index rose 0.3 percent as of 1:06 p.m. local time, taking this year’s gain to 63.8 percent.

Export Decline

Export declines slowed in September and the nation’s foreign-currency reserves swelled to a record $2.273 trillion, reports showed yesterday. China’s accelerating economic growth and expectations for the yuan to rise are encouraging investment from abroad.

“Foreign investment may remain at a relatively high level in the coming months as China’s recovery continues to lure investors,” said Lu Zhengwei, an economist at Industrial Bank Co. in Shanghai.

Foreign investment started to rise in August after falling all year. For the first nine months, direct investment from abroad declined 14.3 percent to $63.8 billion from a year earlier, the commerce ministry said today.

In the house price data, the southern export hub of Shenzhen led the gains, with an 11.1 percent increase in September from a year earlier.

Home sales jumped 73.4 percent in the first nine months of 2009 from a year earlier to 2.75 trillion yuan, the statistics bureau said. Investment in property development accelerated to growth of 17.7 percent.

--Li Yanping, Paul Panckhurst, Chia-Peck Wong. Editors: Paul Panckhurst, John McCluskey.

To contact Bloomberg News staff for this story: Li Yanping in Beijing at +86-10-6649-7568 or yli16@bloomberg.net

Last Updated: October 15, 2009 21:31 EDT