March 4 (Bloomberg) -- China’s stocks rose, driving the benchmark index to its biggest gain in four months, on speculation the government will announce new stimulus measures to revive the world’s third-largest economy.

Aluminum Corp. of China Ltd. and Jiangxi Copper Co. surged at least 8 percent after the former statistics bureau head Li Deshui said Premier Wen Jiabao will announce a new “stimulus package” tomorrow in his annual address to the nation’s legislature. Stocks also gained after the official manufacturing index rose for a third month, signaling that the economy may be edging closer to a recovery.

“It’s important for the Chinese government not to lose momentum in stimulating the economy,” said Winson Fong, who helps manage $2 billion at SG Asset Management H.K. Ltd. “It’s encouraging that the economy seems to be responding.”

The benchmark Shanghai Composite Index jumped 6.1 percent to 2,198.11 at the 3 p.m. local-time close. That’s the biggest gain since Nov. 10, when it climbed 7.2 percent after the government announced its 4 trillion yuan ($585 billion) spending plan. Only one stock dropped on the 896-member measure today.

The CSI 300 Index, which tracks shares on both the Shanghai and Shenzhen exchanges, rose 6.7 percent.

The Shanghai Composite has rallied 21 percent this year, the world’s best performer, on expectations the government’s spending plan will support earnings after an exports collapse dragged the economy to its weakest growth in seven years.

“In Premier Wen’s report tomorrow, there will be an announcement of a new stimulus package,” Li said when asked by reporters if China would double or triple the 4 trillion yuan package. Li, also a former member of the central bank’s monetary-policy committee, spoke in Beijing today.

‘Massive’ Increase

The Communist Party’s Politburo pledged last month a “massive” increase in government investment this year and Standard Chartered Bank Plc says the package may be doubled. China will spend more on infrastructure and to boost manufacturing in addition to November’s stimulus package, Reuters reported today, citing an unidentified official at the country’s top economic planning agency.

Aluminum Corp., the nation’s biggest producer of the metal, climbed 9 percent to 9.61 yuan. Jiangxi Copper Co. gained 10 percent to 16.73 yuan. Baoshan Iron & Steel Co., the country’s No. 1 steelmaker, added 4.7 percent to 5.60 yuan. Industrial & Commercial Bank of China Ltd., the nation’s largest lender, gained 4.9 percent to 3.83 yuan.

There are already signs the government’s spending is taking effect. The Purchasing Manager’s Index rose to a seasonally adjusted 49 in February from 45.3 in January, the China Federation of Logistics and Purchasing said today in an e-mailed statement. A reading below 50 indicates a contraction.

‘Likely’ Recovery

An economic recovery in the first half is “very likely,” central bank Vice Governor Su Ning told reporters yesterday.

Citic Securities Co., the nation’s largest brokerage, surged 9 percent to 22.97 yuan after the legislature’s spokesman Li Zhaoxing said the government plans to reduce the levy on stock sellers this year. China scrapped stamp duty on equity purchases in September.

Haitong Securities Co., the second largest, rallied 9.9 percent to 11.97 yuan. Northeast Securities Co. gained 10 percent to 20.93 yuan.

The government also plans to amend the country’s tax code to boost consumption and spur exports, Li Zhaoxing said.

China Vanke Co., the nation’s largest developer by market value, jumped 6.5 percent to 7.90 yuan after the Guangdong provincial government unveiled measures to support the property market.

The southern province will allow real estate developers to delay payments on land purchases for as long as two years as part of measures aimed at supporting the industry, according to a statement on the government’s Web site.

Poly Real Estate Group Co., the second-biggest developer, rose 8.9 percent to 19.91 yuan. Gemdale Corp. added 10 percent to 8.93 yuan.

The following shares also rose or fell in China trading. Stock symbols are in parentheses after company names:

Defense-related stocks: China’s military spending will rise 14.9 percent this year to 480.6 billion yuan, Li Zhaoxing, a spokesman for China’s legislature, said today at a press conference.

Centennial Brilliance Science & Technology Co. (000703 CH), a radar manufacturer, jumped 10 percent to 4.17 yuan. Xi’an Aircraft International Corp. (000768 CH), an aircraft component maker, advanced 6.5 percent to 23.65 yuan.

Chongqing Changan Automobile Co. (200625 CH), the manufacturer of Changan mini cars, added 7.1 percent to HK$3.02. The company said it will pay up to HK$3.68 per share to buy back as many as 423 million of its so-called B-shares.

Guangzhou Shipyard International Co. (600685 CH), a shipyard operator, climbed 8.4 percent to 17.99 yuan after the company and its unit Guangzhou Hongfan Information Technique Co. were designated “high-tech” enterprises by tax authorities in Guangdong for the years 2008-10. This allows them a tax rate of 15 percent, compared with 25 percent previously, Guangzhou Shipyard said.

SDIC Huajing Power Holdings Co. (600886 CH), a power generation company, gained 10 percent to 10 yuan after resuming trade for the first time since Dec. 8. The company said it will swap 7 billion yuan of shares for assets from its parent, according to a filing today to Shanghai’s stock exchange. The company will swap 825 million shares at 8.49 yuan each, it said.

To contact the reporter on this story: Chua Kong Ho in Shanghai at kchua6@bloomberg.net

Last Updated: March 4, 2009 03:00 EST