The key index initially fell as low as 2,306.66 points on lingering concerns over share supply glut, rising inflation pressures and a slowing economy.

But hopes on a near-term economic stimulus package from Beijing sparked a rally in Shanghai and aided other Asian markets despite an overnight decline in Wall Street.

The benchmark Shanghai Composite Index, which covers both A and B shares, was up 178.81 points at 2,523.28 on a turnover of 59.0 billion yuan (8.6 billion dollars).

The key index saw the biggest single day percentage gain since April 24 after the government cut the stamp duty. It had fallen around 60 percent from its peak last October ahead of Wednesday's rally.

"The rally was triggered by market talk that Beijing will launch measures to buoy the market, such as trade on credit, stock index futures or new rules on the sales of previously nontradeable shares," said Yan Li, an analyst from Southwest Securities.

She said brokers would benefit the most from such measures as it would boost their sales.

The Shanghai A-share index rose 187.71 points, or 7.63 percent, to close at 2,648.75 on turnover of 58.7 billion yuan, while the Shenzhen A-share index jumped 50.30 points, or 7.21 percent, to 747.58 on turnover of 26.2 billion yuan.