The benchmark Shanghai Composite Index closed at 3,438.37 points, up 3.16 points, setting for its highest close since the gauge was closed at 3,369.92 on June 4, 2008.

The Shenzhen Component Index ended at 13,836.66 points, up 93.25 points, or 0.68 percent.

Combined turnover expanded to 374.27 billion yuan ($54.79 billion) from 352.33 billion yuan on the previous trading day.

Gainers outnumbered losers by 576 to 284 in Shanghai and 473 to 266 in Shenzhen.

Investors are showing a high level of enthusiasm as the country's stock market rebounds, increasing 88 percent from the beginning of the year on economic recovery, said dealers.

Premier Wen Jiabao said the government would adhere to its proactive fiscal policy and moderately easy monetary policy to assist sustained growth during a tour of northeast Jilin province at the weekend.

Steel shares, which gained 6.31 percent, contributed most to the gains with eight companies rising by the daily limit of 10 percent. Inner Mongolia Baotou Steel Union Co, advanced 10.09 percent to 4.91 yuan, and Jinan Iron and Steel Co, gained 10.07 percent to 6.12 yuan. Baoshan Iron and Steel Co, China's biggest steelmaker, added 8.67 percent to close at 9.4 yuan.

Electronic instrument and machinery stocks rallied 2.84 percent and 2.03 percent respectively on optimism that the country's machinery industry has rebounded and would lift as the economy bottoms out.

China's machinery industry output expanded 7.28 percent year-on-year to 4.79 trillion yuan in the first half of 2009, said China Machinery Industry Federation (CMIF) Tuesday. The federation says it believes the machinery industry would grow further in the second half as the nation's economy picks up.

Coal shares led the losses as six companies posted bigger than 3 percent declines. Henan Shenhuo Group Co, lost 4.73 percent to 32 yuan, and Shanxi Guoyang New Energy Co, slid 4.02 percent to 44.43 yuan. Yanzhou Coal Mining Co dropped 3.84 percent to finish at 21.27 yuan.

Non-ferrous metals stocks fell in the the afternoon trading secession with six companies losing more than 3 percent. Jiangxi Copper Co, the country's biggest producer of the metal, plummeted 4.57 percent to 46.81 yuan after it jumped 81 percent Monday.