China stocks inched up on Tuesday, recovering early losses, but investors were cautious about staking out fresh positions ahead of a politically-sensitive Communist Party Congress and third-quarter economic data later in the week.

Sentiment was also aided central bank's 190 billion yuan ($28.8 billion) injection into the interbank market, a move apparently aimed at easing liquidity concerns after China's benchmark 10-year treasury yield climbed above 3.7 per cent on Monday to its highest level this year.

The blue-chip CSI300 index rose 0.2 per cent to 3,921.57 points by the end of the morning session, while the Shanghai Composite Index gained 0.1 per cent to 3,380.38.

National Party Congress

Chinese authorities are keen to see stability in financial markets heading into the twice-a-decade party congress starting on Wednesday, where President Xi Jinping is expected to lay out new policy initiatives and further consolidate his power for his second five-year term.

Investors are closely watching to see if Xi does amass more power and signal any possible changes in reform initiatives, especially concerning state-owned enterprises (SOEs), curbing risks in the financial system and property taxes, though no major policy changes are expected to be announced for months.

Even bland government pronouncements on SOE reforms or new initiatives in sectors such as tech or the environment have triggered buying sprees in those counters before.

GDP data awaited

Markets are also awaiting third-quarter gross domestic product (GDP) data on Thursday and will be closely watching for any signs of a long-expected slowdown after a strong first half.

Economists polled by Reuters expect economic growth dipped marginally to 6.8 per cent in the third quarter from 6.9 per cent in the previous quarter as government crackdowns on debt risks and speculation in the housing market start to bite.

UBS strategist Gao Ting also cited the prospects of high interest rates and government-mandated cuts in industrial production as risks to growth, advising investors in A-shares to stay balanced between cyclicals and defensives.

Campaign to curb air pollution

Beijing has embarked on its toughest campaign yet to curb winter air pollution, ordering many mills and factors in northern areas to reduce output or shut altogether.

In another possible sign that economic growth rates may fade, government spending in China increased at the slowest pace in 11 months in September, after Beijing frontloaded most of its spending early in the year.

Some traders are now expecting a possible upside surprise in the GDP reading, however, after central bank governor Zhou Xiaochuan said earlier this week that the economy could grow 7 per cent in the second half of the year, versus 6.9 per cent in the first six months.

Blue-chip sectors in which the government controls sizeable stakes, such as financials and utilities , held firm.

But resources shares remained under selling pressure, down 0.3 percent, reflecting market views that the sector's 30 per cent surge this year - fuelled by capacity cuts and a jump in commodity prices - has run its course.

Hong Kong stocks hovered around 10-year peak, as Asian equity markets are on track to rise for six sessions in a row. Both the Hang Seng index and the Hong Kong China Enterprises Index gained 0.2 per cent to 28,744.01 points and 11,625.85, respectively.

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