* China growth slows, but economy grew slightly more than expected

* Nikkei slips 2 pct, giving back half of Monday's rally

* Falling U.S. Treasury yields sap appeal of greenback

By Lisa Twaronite

TOKYO, Oct 21 (Reuters) - Asian shares languished after giving up small gains on Tuesday, as modest relief on data showing the Chinese economy grew slightly more than expected was replaced by lingering concerns of weakening momentum in the world's second-biggest economy.

European shares might fare better at the open, with financial spreadbetters predicting Britain's FTSE 100 would open up 0.1 percent, while Germany's DAX and France's CAC 40 were each seen up 0.2 percent.

"Today's session in Europe was set to take a fairly strong lead from the U.S., and open significantly higher this morning, but Chinese Q3 GDP data appears to have taken some of the edge off," Michael Hewson, chief market analyst at CMC Markets, wrote in a note to clients.

China's gross national product expanded 7.3 percent between July and September from a year earlier, slightly above expectations but slower than the 7.5 percent clocked in the second quarter.

It was also the weakest growth rate in nearly six years, putting at risk Beijing's official annual growth target for the first time in 15 years and adding to worries that China is becoming a drag on the global economy.

"The data was better than I expected, more optimistic than we thought. But we definitely cannot achieve the 7.5 percent growth target this year," said Lin Caiyi, chief economist at Guotai Junan Securities in Shanghai.

Other data showed factory output rose 8.0 percent in September from a year earlier, beating expectations for a 7.5 percent increase and up from August's six-year low of 6.9 percent.

However, fixed asset investment and retail sales figures were weaker than expected, suggesting that Beijing still has reason to announce a fresh round of economic support measures though analysts don't see aggressive stimulus steps.

MSCI's broadest index of Asia-Pacific shares outside Japan erased modest gains made after the Chinese figures, and bobbed around the previous session's close. The Shanghai Composite index slipped 0.4 percent.

Japan's Nikkei stock average extended losses and closed down 2 percent as the yen strengthened and investors locked in profits after the previous session's 4 percent rally. The market also latched on to vague comments from welfare minister on a $1.2 trillion public pension fund as an excuse to take profits from outsized gains the previous day on hopes of more stock buying by the fund.