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The benchmark Shanghai Composite Index opened at 2,864.26, a decrease of 2.25 percent from the closing point of the previous session. However, the stocks, led by financial shares, started to recover the loss within twenty minutes.

At the close of the session, the Shanghai Composite Index gained 83.96 points, or 2.87 percent at 3,014.44. The Shenzhen Composite Index closed up 9.81 points, or 1.27 percent, at 784.57. The Shanghai and Shenzhen 300 index of major companies rose 55.19 points, or 2.12 percent to 2,659.41.

Financial shares took the lead in Monday's increase. The Industrial and Commercial Bank of China, the country's biggest lender, rose 4.65 percent to 5.18 yuan while China Life, China's largest life insurer, gained 4.38 percent to 35.29 yuan.

China Merchants Bank surged 5.41 percent to hit 16.36 yuan and Bank of China was up 5.8 percent to 5.29 yuan.

The gain was coupled with an expansion in trading. The volume in the Shanghai Stock Exchange hit 94.82 billion yuan, with 10.997 billion shares changing hands while the turnover in the Shenzhen Stock Exchange reached 46.76 billion yuan, with 895 million shares changing hands.

The surge came after the People's Bank of China raised benchmark one-year lending and deposit rates by 0.27 percentage point at the weekend, the third increase in less than one year.

Smaller lenders made bigger percentage gains, with Shanghai Pudong Development Bank up 9.8 percent to 25.37 yuan. China Minsheng Banking rose 7.9 percent to 11.90 yuan and Hua Xia Bank jumped 6.5 percent to 10.12 yuan.

The rate rise was the latest in a series of tightening measures to cool off the torrid economy which, as Premier Wen Jiabao said Friday, is facing a list of problems, including excessive investment, credit, liquidity and swelling foreign exchange reserves.

Despite the gains in the indexs and financial shares, the declining shares outnumbered the advancing ones in the two bourses by a ratio of 6 to 5.