BEIJING (Reuters) - China struggled out of the gate this year with its weakest quarter on record, but a pick-up in March showed the world's third-largest economy was on track for stronger growth in coming months.

A surge in lending and public spending cushioned a collapse in exports, suggesting that while Beijing may yet do more to prop up demand, it need not launch a new stimulus package on the scale of its 4 trillion yuan ($585 billion) plan announced last year.

Annual economic growth slowed to 6.1 percent in the first quarter from 6.8 percent in the fourth quarter, official data showed yesterday, slightly missing economists' 6.3 percent forecast and marking the weakest expansion since quarterly records began in 1992.

But analysts said that quarter-on-quarter growth, which the government does not publish, was in the range of 5.3-6.2 percent in the first quarter, considerably above their estimates of 0.9-2.5 percent for the final three months of 2008.

"The series of policies to expand domestic demand and promote stable and quite fast growth are beginning to show results," the official Xinhua news agency said summarising a meeting of China's State Council, or cabinet. "There are positive changes in the economy and the situation is better than expected," said the report of the meeting, which was chaired by Premier Wen Jiabao.

The cabinet also struck a cautious note, warning against "blind optimism" about the economy. It promised to take steps to encourage private investment, which it said was still too weak, and said it would study how to attract more foreign investment.

The cabinet vowed to tweak existing stimulus measures and guide the flood of bank credit to ensure it reaches the economy, but it made no mention of a new stimulus package, an idea that had surfaced as a market rumour in recent days.

Analysts said the economy's momentum lent more credence to Beijing's assurances that it can reach its 2009 growth goal of eight percent, widely seen as a minimum for creating enough jobs for the country's ever-expanding labour force.

Shares in Shanghai see-sawed as the market digested the data to close 0.1 percent lower. World stocks eked out small gains after Asian markets pulled back from a six-month high and the safe-haven yen gained as investors abroad took China's weak quarter as a sign of the frailty of the global economy. With the United States, Japan and much of Europe all deep in recession, investors count on China to lead the global recovery and many had bet on a stronger number that would send a clear signal that the world's main growth engine was back in business.

Yet when economists looked beyond the headline figure, they found reasons for optimism that China's recovery will gather steam in coming quarters. Annual growth in urban fixed-asset investment surged unexpectedly to 28.6 percent in the first three months, while annual industrial output growth rebounded to 8.3 percent in March from a record low 3.8 percent in January-February.

"The economy has started to benefit from the end of the massive destocking process as well as the government's stimulus package," said analyst Mingchun Sun.