HONG KONG: Chinese stocks jumped on Tuesday after Beijing eased financing rules to boost local government spending on public works while expectations of lower central bank rates globally and some signs of easing trade tensions also supported sentiment.

The Shanghai Composite climbed 2.6 per cent to 2,925.72 points, a level not seen since May 29, while the blue-chip rallied 3 per cent.

Giving a boost to domestic shares was news that China would allow local governments to use proceeds from special bonds for major investment projects, including highways, gas and power supply and railways, which would help prop up a slowing economy.

Additionally, expectations for interest rate cuts globally have given investors a catalyst to re-enter China's market following disappointing performance in May, said Linus Yip, chief strategist at First Shanghai Securities in Hong Kong.

"Policy has been supportive and that helps with domestic demand, with things like utilities," said Yip.

Gains were seen across the board, with CSI300's financial sub-index up 2.4 per cent, technology index up 4.3 per cent, and consumer staples stocks higher by a whopping 5.3 per cent.

In Hong Kong, the Hang Seng Index rose 0.8 per cent to 27,789.34 points, while H-shares climbed 0.9 per cent.

The smaller Shenzhen index gained 3.7 per cent and the start-up board ChiNext Composite index climbed 3.9 per cent.

In global markets, sentiment has improved as investors moved to price in more than two 25 basis point of cuts by the Federal Reserve in 2019, with one almost fully priced in by July .

This encouraged foreign investors to advance in Chinese equities, according to Cao Xuefeng, head of research at Huaxi Securities.

"This has changed the risk appetite for financial markets," he said. "If the US lowers rates, capital may go to higher yielding markets. They could flow into A-shares."

Foreign investors bought a net 7.37 billion yuan of Chinese shares on Tuesday. They were net sellers in May.

Zhang Qi, an analyst at Haitong Securities in Shanghai, said many investors are buying the recent dip, pointing to high trading volumes. About 26.05 billion shares have been traded on the Shanghai exchange, the most since May 17. The volume traded was 16.66 billion on Monday.

But continued concerns about the US-China trade war, which has showed no material signs of ending, remain a cloud on the outlook.

US President Donald Trump said on Monday he was ready to impose another round of punitive tariffs on Chinese imports if he cannot make progress in trade talks with China's President at a Group of 20 summit later this month.

China's Foreign Ministry said on Monday it has nothing to announce about a possible meeting between the Chinese and US leaders at this month's G20 summit, though the country is open for more trade talks with Washington.