The data came as President Hu Jintao faced pressure on a visit to the United States to loosen controls on the yuan currency, which US critics say is valued too low, giving China an unfair advantage.
Gross domestic product rose by 9.8 percent in the fourth quarter, accelerating from the previous quarter and exceeding analysts' expectations, cementing China's position as the world's second-largest economy.
While consumer inflation in December eased from the previous month, it remained stubbornly high at 4.6 percent despite Beijing's efforts to rein in prices, spooking investors in the region who fear further tightening measures.
Shanghai's stock market was 1.59 percent lower in late trade, Hong Kong fell 1.26 percent, Tokyo closed down 1.13 percent and Sydney lost 0.97 percent. Seoul closed 0.43 percent lower.
Analysts said the pick-up in growth in the fourth quarter -- partly driven by stronger exports -- and the still-high inflation in December supported the case for further interest rate hikes and bank lending curbs.
"Policymakers will not claim a big victory on the fall of CPI inflation to below five percent in December," said Lu Ting, an economist at Bank of America-Merrill Lynch.
The 2010 GDP figure, up from a revised 9.2 percent growth in 2009 and better than the 10 percent forecast by the World Bank, highlighted China's growing might in a year when other major economies remained in the doldrums.
"Currently the economy is in a critical period of transforming from recovery to stable growth," Ma Jiantang, Commissioner of the National Bureau of Statistics, told reporters.
Ma said China would boost efforts to transform its "economic growth pattern" -- echoing comments made Wednesday in Washington by President Hu, who pledged to boost domestic demand and spending.
The country's consumer price index, the main gauge of inflation, rose 3.3 percent for all of 2010 -- exceeding the government's full-year target of three percent as food costs soared.
The December figure was slightly better than the 5.1 percent increase in November, which was the fastest pace in more than two years.
"In 2011, we need to take the task of controlling prices very seriously," Ma said, but added: "We should have full confidence that we will be successful in 2011."
Analysts said the government was facing a tough task.
"Price pressures will remain uncomfortably strong in the months ahead, and the dip in headline CPI inflation in December will likely be temporary," said Brian Jackson, an analyst at Royal Bank of Canada.
For IHS Global Insight analyst Alistair Thornton, "a new wave of credit expansion is driving inflationary pressure, in both consumer prices and asset markets, with a re-acceleration in construction and fixed investment."
Output from the country's millions of factories and workshops rose 15.7 percent for all of 2010 as government spending on infrastructure in urban areas rose 24.5 percent over the 12 months.
Retail sales rose 18.4 percent in 2010.
As the United States and Europe struggle to spur growth, Beijing has been trying to slow its economy and stem a flood of liquidity that is fanning inflation and driving up property prices, straining household budgets.
The central bank last Friday again ordered banks to increase the amount of money they keep in reserve, effectively putting a cap on lending, after raising interest rates twice in the fourth quarter.