SHANGHAI shares rose yesterday after China's economy expanded at a better-than-expected pace in the second quarter of this year.

The Shanghai Composite Index climbed 1.5 percent to 2,795.48, the biggest gain since July 4.

The cross-board rally showed confidence has returned among investors after economic growth data reassured markets that the world's second-largest economy is maintaining momentum, said Zhou Xuesong, an analyst at Sealand Securities.

China's gross domestic product rose 9.5 percent year on year in the second quarter and gained 9.6 percent in the first half of this year despite a slew of monetary tightening polices aimed at curbing inflation.

Retail sales jumped 16.8 percent from January to June on an annual basis, showing domestic demand held up relatively well, according to the National Statistics Bureau.

"The economy is likely to continue growing at a fast pace in the second half, and inflation is expected to ease a bit," Zhou said. "This is good news for companies."

Zhou said he expects the US dollar to rebound in the near future and this will likely mean lower commodity prices, which will ease pressure on Chinese companies that import a lot of raw materials.

An index tracking purchasing prices for manufacturers has already dropped considerably in the past two months, meaning raw materials are becoming cheaper, Zhou added.

Commodities were among the best performers yesterday as worries eased about a slowing economy reducing demand.

Zhongjin Gold climbed 4 percent to 28.94 yuan. Jiangxi Copper, the nation's biggest producer of the metal, climbed 3.4 percent to 36.07 yuan. Jiangxi Copper said in a statement that its first-half net income may climb more than 50 percent from a year earlier on higher output and sale prices.

Financial firms also rose on back of the GDP report.

The Industrial and Commercial Bank of China added 1.2 percent to 4.34 yuan. Ping An Insurance climbed 1.8 percent to 47.42 yuan.