China's stocks rose the most in a month after the head of the securities regulator said the nation can increase by 10 times the size of two investment programs that allow foreign investors to buy securities.

The Shanghai measure has risen 18 percent from an almost four-year low on Dec. 3, while the CSI 300 climbed 22 percent on signs economic growth is picking up. Government reports last week showed exports expanding more than economists forecast, while inflation accelerated.

A gauge of brokerages, banks and developers in the CSI 300 jumped 4.8 percent, the most among 10 industry groups and the steepest gain since Dec. 14. Citic Securities, the biggest brokerage, climbed 6.9 percent to 13.59 yuan. Haitong Securities Co. (600837), the second largest, added 7 percent to 10.26 yuan.

The government scrapped a ceiling on investments by overseas sovereign wealth funds and central banks in its capital markets last month, part of government efforts to encourage long-term foreign ownership and shore up slumping equities.

China has also started preparations for a trial program that would allow individuals to invest in overseas capital markets as the nation seeks a greater role for its currency in global finance.

The People's Bank of China will proactively prepare for the trial of its qualified domestic individual investor program, it said in a statement on its website on Jan. 11, without giving further details. The central bank lists the so-called QDII2 initiative as one of its major goals for 2013.

David Fuller's view The clear message here, in case there was any doubt, is that China's new government wants its mainland stock market to appreciate.

This item continues in the Subscriber's Area and contains two additional articles. This is not proving to be a difficult challenge because valuations were near historic lows for this century.

Why does China want a stronger stock market? Presumably because it will help to build confidence in the economy, just as the serial underperformance for over three years until December undermined confidence, not least among foreign investors and businesses with an interest in China. Also, a performing stock market will attract local interest and preferably reduce the obsession with property which led to inflationary problems.

Today's surge by China's Shanghai A-Index (weekly & daily), more than offsetting Friday's downward dynamic, confirming that demand still has the upper hand. It is also consistent with the wider ranging and probably somewhat slower period of overall upward trending that I mentioned on Thursday and Friday of last week. A decline beneath Friday's low near 2340 would now be required to question scope for a further ranging recovery towards the next area of potential resistance near 2600, and this move has the potential to carry significantly higher over the medium term.

A lesson in all this is that China's stock market is more managed by government officials than most. Therefore it is all the more important to monitor the medium-term trend. The last one was characterised by lower rally highs, until the most recent of these were broken in mid-December.