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* SSEC +0.2 pct, CSI300 +0.3 pct, HSI +0.4 pct
* China to raise RQFII quota for Hong Kong to 500 bln yuan
* Commercial pension funds encouraged to invest in capital markets
SHANGHAI, July 5 (Reuters) - China stocks rose on Wednesday, led by strong gains in big-cap insurers, while a government policy paper promoting the use of commercial pension money in capital markets also buoyed markets.
The CSI300 index rose 0.3 percent to 3,632.13 points at the end of the morning session, while the Shanghai sComposite Index gained 0.2 percent, to 3,190.34 points.
Commercial pension funds are encouraged to invest in stocks, bonds and funds, in order to provide long-term stable support for the healthy development of China's capital markets, a policy paper dated July 4 from China's cabinet shows.
The policy is expected to bring more long-term funds into the stocks market, benefiting the blue-chips, favoured by institutional investors looking for solid fundamentals.
The mainland stock market also drew support from China's move to hike the quota under the Renminbi Foreign Institutional Investor (RQFII) scheme for Hong Kong to 500 billion yuan ($73.59 billion) to further meet demand for yuan asset allocation by Hong Kong investors.
As a pioneer to promote the yuan's internationalisation, Hong Kong was granted a 270 billion yuan quota under the RQFII scheme in 2011 to facilitate cross-border foreign investment.
"The increase could have a positive impact on the (mainland) stock market," said Zhang Qi, a Haitong Securities analyst.
Financials led the advance in the morning.
Insurance industry bellwether New China Life Insurance hit an 18-month high before ending up 6.7 percent.
Hong Kong stocks steadied, as shares in index heavyweight Tencent Holdings, China's biggest gaming and social media firm by revenue, recouped earlier losses to rise 0.9 percent in the morning session.
The stock slumped more than 4 percent on Wednesday, posting its worst day in 17 months, after it said it will limit play time for some young users of "Honour of Kings".
The Hang Seng index added 0.4 percent, to 25,478.85 points. The Hong Kong China Enterprises Index gained 0.3 percent, to 10,340.85 points. ($1 = 6.7947 Chinese yuan renminbi)
Reporting by Luoyan Liu and David Stanway; Editing by Himani Sarkar