* President Xi Jinping oversees celebrations, military parade
* Xi pledges China to remain on path of peaceful development
* China highlights military and technological prowess
* Celebrations come amid challenges of trade war, Hong Kong unrest (Adds Pentagon official comment)
By Ben Blanchard
BEIJING, Oct 1 (Reuters) - China celebrated its growing power and confidence with a big display of military hardware and goose-stepping troops in Beijing on Tuesday, overseen by President Xi Jinping, who pledged peaceful development on Communist China's 70th birthday.
The event is the country's most important of the year as it looks to project its assurance in the face of mounting challenges, including nearly four months of anti-government protests in Hong Kong and an economy-sapping trade war with the United States.
Xi, dressed in a slate grey "Mao" suit and accompanied by his predecessors Hu Jintao and Jiang Zemin, said China would pursue a mutually beneficial strategy of opening up.
The military should resolutely safeguard China's sovereignty, security and development interests, and firmly uphold world peace, Xi told a handpicked crowd at Tiananmen Square, in comments carried live on state television.
"No force can ever shake the status of China, or stop the Chinese people and nation from marching forward," Xi said from the Gate of Heavenly Peace, where Mao Zedong proclaimed the founding of the People's Republic of China on this day in 1949.
China must maintain lasting prosperity and stability in Hong Kong and Macao, promote the peaceful development of relations with self-ruled Taiwan and "continue to strive for the motherland's complete reunification", he added.
Xi, whose military modernisation programme has rattled nerves around the region, then inspected row upon row of military hardware and immaculately presented troops.
At one stage, Xi, riding past troops in a black, open-roofed limousine, shouted: "Hello comrades, hard-working comrades!"
The massed ranks bellowed back: "Follow the Party! Fight to win! Forge exemplary conduct!"
Returning to the stage, Xi watched as lines of tanks, drones and missiles filed past.
Among the weapons on display were DF-41 intercontinental ballistic missiles, the backbone of China's nuclear deterrence, which can carry several nuclear warheads and reach as far as the United States.
"They have highly advanced capabilities and the range to reach the United States from mainland China," said Nozomu Yoshitomi, professor at Japan's Nihon University and a retired major general of Japan's Ground Self-Defence Force.
"Also, this is probably the first time they have shown us JL-2 submarine-launched ballistic missiles in a parade. They don't have the range to reach the United States from waters around China, but they demonstrate China's second-strike capability."
In Washington, a senior Pentagon official said the parade appeared to be largely in line with expectations.
"We'll do the post-game analysis on it but I think it is in line with expectations," said Randall Schriver, who leads Asia policy at the U.S. Defence Department.
After the military parade, dancers and floats lauding China's history, achievements and its regions passed by, along with portraits of China's previous leaders and Xi himself, which drew loud cheers.
The upheavals of the last seven decades — including the Great Leap Forward, the Cultural Revolution and bloody crackdown on pro-democracy demonstrators at Tiananmen Square in 1989 - did not get a mention.
CAPITAL LOCKED DOWN
The more than two-hour parade of 15,000 soldiers, 70 floats and 100,000 civilians was a proud moment for many citizens, watching the spectacle across the country on television.
"I'm not that familiar with the military, but I was stunned by them. I was covered in goosebumps," said Shanghai student Meng Yichen, watching at her university.
"I loved the women troops. I'd not seen many before, so seeing so many this time was a great step forward."
One highlight for many Chinese was the appearance of Hong Kong policeman Lau Chak-kei waving a Chinese flag in the crowd. Lau is viewed as a hero in China after he pointed a shotgun loaded with beanbag rounds at hundreds of protesters besieging a Hong Kong police station on the night of July 30.
Lau was the fourth most-searched topic on China's Twitter-like Weibo service on Tuesday.
Xi remains broadly popular in China for his aggressive campaign against corruption and for propelling what is now the world's second-biggest economy to the forefront of global politics.
But he faces mounting challenges, notably in Hong Kong, which has been rocked by protests demanding greater democracy.
The former British colony was in lockdown on Tuesday with barricades in the city centre, shuttered stores and a heavy police presence. Embattled Hong Kong leader Carrie Lam was in Beijing for the anniversary celebrations.
Another challenge is Chinese-claimed Taiwan, a free-wheeling democracy with little interest in being run by Beijing and which holds presidential elections in January.
Taiwan on Tuesday condemned China's "dictatorship", saying it was a threat to peace.
There are also restive minorities in Tibet and heavily Muslim Xinjiang, where China has faced international opprobrium for detaining up to one million ethnic Uighurs in what China calls a de-radicalisation scheme.
Underscoring another problem Xi faces, the parade took place under smoggy Beijing skies, despite region-wide efforts to curb emissions ahead of the anniversary.
The capital has been under tight security, with police telling residents of houses on the parade route not to look out their windows.
Members of the general public were not permitted to attend the parade, which was limited to a carefully vetted crowd.
On a main road leading into central Beijing, several kilometres from Tiananmen Square, crowds gathered, craning their necks to see.
A roadsweeper urged a bystander to go home and watch on television.
"You can't walk to Tiananmen Square. You can't go further than here," he said.
(Reporting by Ben Blanchard; Additional reporting by Michael Martina, Ryan Woo, Yawen Chen and Tony Munroe, Shanghai newsroom, Twinnie Siu in Hong Kong and Kiyoshi Takenaka in Tokyo; Editing by Lincoln Feast, Robert Birsel and Dan Grebler)