Power supply firms, banks and petrochemical stocks led the advance. Huaneng International, China's largest power supply company, jumped 5.62 percent to 13.73 yuan per share.

The Industrial and Commercial Bank of China (ICBC) rose 6.13 percent to 7.10 yuan per share. As the largest bank in China, the ICBC's market value has surpassed CitiBank and Microsoft, becoming the world's third largest listed company. The Bank of China soared8.61 percent to 6.31 yuan per share.

Sinopec climbed 3.30 percent to stand at 15.65 yuan per share.

The Shenzhen Component Index on the small stock exchange market, driven up by property firms in the past few days, dropped 207.33 points to close at 16,116.1 points on Monday.

Analysts said only a small number of investors recorded profits from the rise as only about one third of the stocks rose while two thirds remained level or dropped.

Some institutions are pulling the major index up and preparing to sell their stocks, they said.

The combined turnover on the two bourses is more than 235 billion yuan (31.04 billion U.S. dollars), up from 228 billion yuan on the previous trading day.

China's consumer price index rose 5.6 percent in July compared with a year earlier, nearly doubling the government-set alarm level of three percent for 2007. Analysts expected the high CPI figure to bring more tightening measures.

The figure, however, did not panic investors. The Shanghai Component Index saw a slight drop after the new figure for the inflation indicator was released in the morning and then quickly picked up again.

Amid panic brought about by mortgage crisis in the United States, the global stock market slumped markedly last week. But the Chinese market continued its upward trend.

The total market value of stocks on the Shanghai and Shenzhen bourses rose to around 21.15 trillion yuan (2.79 trillion U.S. dollars) last Thursday, even higher than China's GDP in 2006.