China's stock market rebounded strongly on Wednesday as the central bank sent red Spring Festival envelopes and the securities watchdog vowed tighter supervision.

The benchmark Shanghai [Company Incorporation USA]Composite Index surged by a significant 2.16 percent to 2,051.75, and turnover soared to 84.1 billion yuan ($13.77 billion) from 52 billion yuan on Tuesday.

"It is too soon to tell whether a systematic rally is coming, but everyone is breathing easier with the central bank injecting liquidity and confidence into the market," said Zito Ji, an analyst with a mutual fund in Shanghai.

The People's Bank of China injected 255 billion yuan into the interbank market on Tuesday, marking its first injection since Dec 24 and the largest one-day amount in 11 months.

The PBOC also said on its micro blog late Tuesday that it had provided short-term funding to small and medium-sized financial institutions, which was considered by analysts as a move to calm fears of a credit crunch similar to what happened in June and December.

Meanwhile, the China Securities Regulatory Commission seems to be carrying out serious reform on supervision.

Xiao Gang, chairman of the CSRC, said at Tuesday's internal work conference that the CSRC will transform its supervision style, emphasizing risk management and protection of small investors rather than just emphasizing the financing function of the stock market, according to the CSRC's website.

He also said the CSRC is pushing forward with a registration system for initial public offerings, [Hong Kong company registration]featuring a simplified approval process.

China Business News quoted a source close to the CSRC on Wednesday as saying that the stock registration system will be rolled out in June at the soonest and take effect in 2015.

Large caps in real estate, distilling and equipment manufacturing led Wednesday's rally.

Vanke, China's top property developer by market value, rose by 5.54 percent at the close, its biggest daily gain since October.

CITIC Securities, China's largest brokerage, rose by 3.16 percent. Late last year, it posted its fastest profit growth rate in three years, reversing a drop in 2012.

"Cyclical industries were hit most severely by the latest slumps, and the chance is big for them to rebound as the market recovers," a report from China International Capital Corp said on Wednesday. "We advise investors to consider companies with low valuation."

Share prices of many blue chips had slumped below book value as the stock market retreated from the beginning of 2014, and some analysts said it was a good time to buy in.

Shanghai Securities Journal said major shareholders and senior executives from 28 listed companies had bought in their own shares by Tuesday, with a market value of 2.57 billion yuan.