Shanghai's economy expanded 5.6 percent on an annual basis in the first half, up 2.5 percentage points compared with the rate in the first quarter, the Shanghai Statistics Bureau said yesterday.

The better-than-expected growth was mainly bolstered by a quick advance in the service industry, particularly the financial sector, thanks to the good performance of the city's stock market and growing businesses in banking, said Cai Xuchu, chief economist at the bureau.

"The city's economy has stabilized and presents signs of rebounding," Cai said.

"The performance in the first half is better than our expectations. However, it will be hard to achieve the government's goal of a 9 percent growth rate for the whole year."

Shanghai's gross domestic product gained 5.6 percent to 661.2 billion yuan (US$96.8 billion) from a year earlier in the first six months. The rate accelerated from the growth of 3.1 percent in the first quarter - the slowest pace since 1992 - and compared with 9.7 percent last year.

The value of Shanghai's service industry jumped 14.2 percent year on year to 381.7 billion yuan, while the agriculture and manufacturing sectors fell 0.5 percent and 3.6 percent respectively to 3.4 billion yuan and 276.1 billion yuan.

The output of the city's financial sector swelled 27.2 percent to 84.9 billion yuan after transactions at the Shanghai Stock Exchange rose 28.2 percent to 14.6 trillion yuan by June.

The benchmark Shanghai Composite Index rocketed 62.5 percent from a year earlier to close at 2,959.36 on June 30.

Meanwhile, outstanding loans in the city grew 19.4 percent to 2.8 trillion yuan, and deposits advanced 25.5 percent to 4.1 trillion yuan.