** The blue-chip CSI300 index rose 1.4% to 3,816.95, while the Shanghai Composite Index also closed 1.4% higher at 2,902.19.

** U.S. President Donald Trump on Monday predicted a trade deal with China after positive gestures by Beijing, calming global markets that have been roiled by new tariffs from the world's two largest economies.

** Chinese Vice Premier Liu He, who has been leading the talks with Washington, said on Monday China was willing to resolve the trade dispute through "calm" negotiations and opposed any increase in trade tensions.

** Profits at China's industrial firms returned to growth in July, helped by improvements in the petrochemical and auto sectors, but a broader economic slowdown and the protracted U.S. trade war are expected to weigh on the business outlook.

** Investors shall be patient in waiting for further policy support from Beijing with loose monetary policy expected in the second half, Dongxing Securities noted in report, adding there is limited room for the U.S. to further escalate the trade war with China as it faces increased pressure at home.

** The expected inclusion factor of MSCI also helped drive A-share market higher, with net northbound inflows via the Stock Connect linking Hong Kong and mainland reaching 11.8 billion yuan ($1.66 billion).

** MSCI is set to raise the inclusion factor for A-shares to 15% from 10% after close on Aug. 27, driving passive net inflow of about $4.5 billion into A-shares, while the pace of active inflow could vary based on domestic and global market changes and numerous macro events such as U.S.-China trade negotiations, analysts at UBS wrote in note.

** Around the region, MSCI's Asia ex-Japan stock index  was firmer by 0.26%, while Japan's Nikkei index  closed up 0.96%.

** At 07:16 GMT, the yuan was quoted at 7.1644 per U.S. dollar, 0.17% weaker than the previous close of 7.152.

** The largest percentage gainers on the main Shanghai Composite index were Liaoning Hongyang Energy Resource Invest Co Ltd, up 10.07%, followed by Lifan Industry Group Co Ltd, gaining 10.06% and North China Pharmaceutical Co Ltd, up by 10.06%.

** The largest percentage losers on the Shanghai index were Jiangsu Xinri E-Vehicle Co Ltd down 6.53%, followed by Nanjing OLO Home Furnishing Co Ltd losing 5.37% and Huadian Energy Co Ltd down by 5.04%.

** As of 07:17 GMT, China's A-shares were trading at a premium of 30.24% over the Hong Kong-listed H-shares.