China stocks rise on domestic outlook

China's stocks rose, extending gains for the benchmark index to 11 percent from this year's low, as a jump in industrial profits and the prospects for increased spending and tourism boosted the domestic economic outlook.

Anhui Conch Cement Co led gains for cement makers after the Economic Information Daily reported China will announce a development for the industry. China Eastern Airlines Corp, the second-largest carrier, climbed to the highest in more than two months after Morgan Stanley raised its rating on the shares. Industrial companies jumped after reporting higher first-half profit, paced by Baoshan Iron & Steel Co's 2.9 percent advance.

"A double-dip for China's economy seems unlikely," said Zhang Ling, a fund manager at Shanghai River Fund Management Co. "The rebound will carry on for a while as stocks are cheap and earnings of some companies have beaten expectations."

The Shanghai Composite Index, which tracks the bigger of China's stock exchanges, surged 58.30, or 2.3 percent, to 2,633.66 at the 3 pm close, the highest since May 28. The CSI 300 Index gained 2.4 percent to 2,863.72.

The Shanghai index has rebounded from this year's low set on July 5 on expectations the government will relax property curbs and allow more bank lending to counter a slowdown in economic growth. Still, the gauge is down 21 percent this year on speculation measures to control real-estate speculation and rising consumer prices will damp earnings.

The government has been seeking to increase domestic consumption to offset a decline in exports as the global recovery slows. China will maintain a moderately loose monetary policy to year-end, Zhang Tao, head of the central bank's survey and statistics department, wrote in the Economic Daily newspaper.

The nation's economic fundamentals remain "good", the People's Bank of China said on its website on Tuesday.

China's decreasing dependence on exports also means the European debt crisis is unlikely to have a large impact, the central bank said in its report for the second quarter.

The central bank is cautiously optimistic about the Chinese economy, it said.

President Hu Jintao and Premier Wen Jiabao pledged last week to maintain policy stability in the second half after measures to rein in property prices, inflation and bank lending eased second-quarter growth to 10.3 percent from 11.9 percent in the first.

UBS AG economist Tao Wang said in a report the speech signaled a "subtle shift" in government policies and that no additional tightening measures will be introduced. The central bank has raised banks' reserve requirements three times this year.

Source: China Daily/Bloomberg