China Stocks Rise On Government Speculation

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China stocks rose, driving the benchmark index up the most in two weeks, on speculation the government will take measures to boost the economy and European leaders will boost efforts to end the debt crisis.

Jiangxi Copper Company and Anhui Conch Cement Co. gained among companies most tied to economic growth after Citigroup Inc. said the government may shift its attention to stabilizing growth. Citic Securities Co., the nation’s biggest listed brokerage, added 1.2% after Xinhua News Agency said the government will accelerate a plan to allow Hong Kong-based yuan funds to invest in mainland securities.

The Shanghai Composite Index climbed 29.36 points to 2,412.39, a 1.2% gain on the welcomed news. The Shanghai Composite has dropped 2.3% in November on concern of slowing growth in China, the world’s second-largest economy. Europe’s sovereign debt crisis also added to the drop. The gauge is valued at 11.4 times estimated earnings, compared with a four-year average of 17.3 times, according to weekly data compiled by Bloomberg. The measure has fallen 14% this year after the central bank raised rates three times and lifted the reserve-requirement ratio to curb inflation.

China is expected to shift from fighting inflation to stabilizing economic growth, which could lead to more policy easing, Minggao Shen and Ben Wei, analysts at Citigroup, wrote in report dated yesterday.

The China Securities Regulatory Commission, the central bank and the State Administration of Foreign Exchange have agreed on a plan, which will allows qualified investors to raise money in yuan from Hong Kong and invest in bonds and A shares, Xinhua News Agency reported.

A Chinese government report due on Dec. 1 may show manufacturing is likely to contract for the first time since February 2009 this month. The Purchasing Managers’ Index may fall to 49.8 from 50.4 in October, according to the median forecast of 16 economists surveyed by Bloomberg. A reading below 50 indicates contraction.