Chinese mainland stocks erased declines in afternoon trading to scratch out a gain for the day, with PetroChina Co leading the rebound as oil prices held near a 17-month high.

The Shanghai Composite Index rose 0.1 percent to close at 3,155.04, after sliding as much as 1.1 percent. PetroChina added 1.9 percent, while China Petroleum & Chemical Corp climbed 0.9 percent. China's industrial output grew 6.2 percent in November from a year earlier, in line with analysts' expectations, while retail sales topped estimates. The Shenzhen Composite Index added 0.3 percent following Monday's 4.9 percent tumble.

Concern about higher money market rates and regulatory moves to curb leveraged equity purchases has dogged the nation's financial markets this week. Stocks, bonds and the currency have also come under pressure before this week's expected US interest-rate hike.

"The figures are good but market sentiment remains cautious after a big drop yesterday," said Linus Yip, a Hong Kong-based strategist at First Shanghai Securities Ltd. "For the past two months people were quite excited that insurers' money was helping to push up the market, but they did it too drastically."

Retail sales advanced 10.8 percent last month, while fixed-asset investment increased 8.3 percent in the first 11 months of the year. With the nation's expansion on pace to land in the middle of the government's 6.5-7 percent full-year objective, attention is shifting to curbing excess corporate borrowing and industrial capacity and reining in surging property prices.

Insurers should act as providers of long-term funds to boost the real economy, instead of as short-term speculators, China Insurance Regulatory Commission Chairman Xiang Junbo said at a meeting on Tuesday. Officials have moved to rein in financial risks associated with a surge in dealmaking by insurers, after the nation's top securities official likened leveraged stock buyers to "robbers".

The Hang Seng China Enterprises Index added 0.2 percent while Hong Kong's benchmark Hang Seng Index rose 0.1 percent. The city's funding costs surged for an 11th day on Tuesday to a 2009 high, making it more expensive to borrow to buy stocks. With the squeeze starting to spill over into other markets, Australia & New Zealand Banking Group Ltd's Raymond Yeung says it's signaling concern about a cash exodus.