China's shares climbed 1.71 percent on Wednesday, led by banking counters such as Merchants Bank Co Ltd after the top Shanghai-listed lender won approval to proceed with a sale of its state-owned stock.
The benchmark Shanghai composite index closed higher at 1,180.963 points, after dipping 0.75 percent in the previous trading session on December 30.
Merchants Bank jumped after it said it had won shareholder approval to proceed with a float of state-owned stock, as part of Beijing's efforts to boost transparency and profitability.
It was the biggest climber of the day, surging 10.03 percent to 7.24 yuan after resuming trade. Its stock had been suspended since December 19 following the announcement of its reform plan.
Smaller rival Minsheng Banking Corp, China's first private lender, rose 4.7 percent to 4.25 yuan, while Pudong Development Bank gained 5.13 percent to 10.25 yuan.
Merchants Bank was one of some 400 firms drafted into Beijing's unpopular programme to float over $250 billion in untraded state holdings in listed firms.
"Merchants was the market leader today, and helped boost other banking stocks," said Chen Jinren, an analyst with Huatai Securities.
China in April revived the programme to convert non-traded state shares, which account for two-thirds of the market's value, into freely floated stock, sparking worries over a possible flood of new shares on to the market.
The move helped push China's benchmark key index down over 8 percent last year, making it Asia's worst performing index for the second consecutive year.