Chinese shares rebounded Wednesday after a sharp fall Tuesday, with investors encouraged after July CPI data came in lower than expected.

The benchmark Shanghai Composite Index closed at 2,607.5 points, up 12.23 points, or 0.47 percent.

The Shenzhen Component Index ended at 10,806.63 points, up 91.24 points, or 0.85 percent.

Turnover contracted to 174.52 billion yuan (25.55 billion U.S.dollars) from 246.83 billion yuan on the previous trading day.

Gainers outnumbered losers 713 to 144 in Shanghai and 823 to 179 in Shenzhen.

China's statistics bureau said Wednesday China's consumer price index (CPI), one of the main gauges of inflation, rose 3.3 percent in July from a year earlier.

Although the figure exceeded the 3-percent full-year target ceiling the government set in March, it was lower than market forecasts of 3.4 to 3.5 percent, which reflected easing inflationary pressures, said Xu Weihong, analyst at Guodu Securities.

This may lower the chances of an interest rate hike and boost market sentiment in the short term, he said.

Buoyed by the lower-than-expected CPI growth, property shares climbed 1.98 percent.

China Vanke, the country's largest property developer by market value, surged 4.5 percent to 8.32 yuan.

Shares related to the Xinjiang Uygur Autonomous Region also rose on Wednesday on a report that up to 13 billion yuan will flow to Xinjiang in a short term to support regional development.

Xinjiang West Construction rose by the daily limit of 10 percent to 25.38 yuan while Xinjiang Urban Construction jumped 9.56 percent to 12.83 yuan.