Chinese shares extended their ascent on Monday as the country's economic fundamentals showed fewer signs of scarring etched by COVID-19.

The benchmark Shanghai Composite Index closed about 0.86 percent higher while the Shenzhen component added 2.47 percent. The ChiNext Index, China's NASDAQ-style board of growth enterprises, gained 3.77 percent to close at 3078.11 points.

The combined turnover of stocks covered by the three indices settled at 1.16 trillion yuan. Rising issues outnumbered decliners by 1,198 to 552 on the Shanghai bourse and by 1,684 to 629 on the Shenzhen counterpart.

China stocks rose to two-year highs since February 2018 on the last trading day of 2020 as China and the European Union sealed a drawn-out bilateral investment agreement.

Morgan Stanley analysts cited by Reuters reiterated their "overweight" stance on Chinese A-shares due to the country's better cushioning of uncertainties clouding China-U.S. tensions.

The purchasing managers' index for China's manufacturing sector has been operating in expansionary territory for 10 months in a row.

The country's industrial sector has staged a strong recovery from COVID-19 thanks to the surprisingly strong exports and targeted, timely measures.

Shares of most sectors posted star-spangled performances, from the likes of agriculture to military and wine-making.

Tesla's Chinese battery supplier Contemporary Amperex Technology Co., Ltd. perked up more than 15 percent by close of trade as a knee-jerk reaction to Tesla delivering a record number of cars in 2020.

Shares in China's three major telecom companies somewhat slid in Hong Kong trading as they were earmarked for delisting on the New York Stock Exchange.