SHANGHAI: China stocks kicked off 2021 on a firm note on Monday, after a survey pointing to a continued recovery in the world's second-largest economy bolstered investor sentiment.

The blue-chip CSI300 index rose 1.1% to 5,267.72, while the Shanghai Composite Index added 0.9%to 3,502.96.

The tech-heavy start-up board ended up 3.8%, while the STAR50 index firmed 2.1%.

China stocks rose to multi-year highs on the last trading day of 2020, as investors cheered a Sino-Europe investment deal and Beijing's policy support for its capital markets.

Activity in China's factory sector rose in December as the economy sustained its recovery to pre-pandemic levels, a business survey showed on Monday, even as higher costs slowed the pace of expansion.

"We are optimistic about the equities market this year, as the fragility of a global economic recovery means the super-loose liquidity conditions would remain, while China pledges continued and stable policy support for its economy," analysts at Zhongtai Securities said in a note.

Analysts at Morgan Stanley reiterated their "overweight" stance on Chinese A-shares, citing an improved possibility of increased weightage in global indices and better cushioning from Sino-US tension uncertainties.

Bucking the broad rally, banking and real estate stocks retreated as Beijing moved to cap property loans by banks.

China's central bank issued a regulation on Thursday to cap property loans by banks, as authorities shift their attention back to debt risks and look to guard against any overlending to the property sector.