Investors monitor the movement of stock prices at a brokerage firm in Guangzhou, South China's Guangdong Province May 9, 2007. [newsphoto]

China's main stock index rose on Monday despite the authorities' concerns about bubbles building in the equity market.

The benchmark Shanghai Composite index gained 0.61 percent to 4,046.39 points, extending this year's gains to 51.25 percent.

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Bank, property and steel shares showed strong performances. China Merchants Bank rose 2.36 percent to close at 22.16 yuan per share. China Vanke, the country's largest publicly traded property developer, went up 7.46 percent to 24.06 yuan. Baosteel gained 3.75 percent to 13.28 yuan.

The increase came after the China Securities Regulatory Commission (CSRC), the Chinese equivalent of Securities and Exchange Commission in the United States, expressed on Saturday its worries about the flood of investors who lack risk awareness and cannot afford a loss.

Demanding the brokerage firms to warn the investors on the risks, the commission also pledged to crack down on insider trading and other illegal practices in a statement on its website.

"Some bubbles" exist in the domestic stock market, the commission admitted in an internal report submitted recently to the State Council, reported the Economic Observer over the weekend.

Describing the bubbles as "structural", the commission attributed the market rallies to excessive capital inflow which needed to be "channeled and diverted."

Citing unnamed sources, the newspaper said the CSRC was not going to resort to "administrative forces" to manage the stock market, and that it would instead allow the market to mature further and make a self-correction.

The State Council is also getting increasingly concerned, evidenced by a summoning of top economists on ways to control the rapid rise of share prices, according to reports.

At a recently convened meeting, prominent economists debated whether stocks were currently in a bubble, and they also discussed whether a capital gains tax might be needed, although no consensus was reached, the reports said.

"Market sentiment is very strong so the CSRC announcement had little impact," said Zhang Qi, analyst at Haitong Securities in a report from Reuters. "Funds are pouring into the market continuously."

A dramatic sign of how investors show little worry about the CSRC's warning was a jump in stock prices of Hangxiao Steel Structure Co.

On Monday the company said it and some of its top executives had been fined for failing to properly disclose information about big contracts that caused its shares to more than quadruple.

But despite the punishment, the stock soared to its 10 percent daily limit to 14.88 yuan -- apparently due to relief that authorities had not acted more harshly.

Also on Monday, the National Bureau of Statistics said that the consumer price index, a barometer of inflation, grew 3.0 percent in April, down from 3.3 percent in the previous month, but still above the central bank's target of three percent for this year.

The figures upped the pressure on the People's Bank of China to hike interest rates as the country's real interest rate has been kept in negative territory. China's benchmark one-year deposit rate stands at 2.79 percent and interest income is subject to a 20 percent tax.