Shareholder keeps an eye on the stock market at a brokerage in Huaibei city, Anhui province on April 10, 2015. [Asianewsphoto by Xie Zhengyi]

Chinese stocks rallied on Friday, with the benchmark Shanghai index edging over the 4,000 mark at a seven-year high, as the latest inflation data produced small positive surprises.

The Shanghai Composite Index closed at 4,034.31 points, up 1.9 percent, while the Shenzhen Component Index advanced 1.6 percent to 14,013.33 points on Friday.

China's consumer inflation rate stayed flat at 1.4 percent in March, the National Bureau of Statistics (NBS) said on Friday, marginally higher than a consensus estimate of 1.3 percent. Producer price index, however, was still down 4.6 percent year-on-year.

Healthcare stocks led the gain on Friday, with medical equipment developers including Guangdong Biolight Meditech, Improve Medical and Jiangsu Yuyue Medical Equipment & Supply surging by the daily limit.

Ping An Bank and Western Securities jumping by the daily limit of 10 percent. Shanghai Pudong Development Bank, Everbright Bank and Shanxi Securities gained more than 3.5 percent.

Fears of an imminent slide into deflation appear excessive, said Bloomberg economist Tom Orlik.

"Monetary easing has been quick to respond, but so far has not been able to produce desirable results," said Kevin Lai, chief China economist at Daiwa Capital Markets in Hong Kong.

The GDP results for the first quarter, due to be released on April 15, will be a key factor driving near-term policy decisions, said the Hong Kong-based economist, adding that the central bank is expected to act immediately by delivering a 25 basis points rate cut if the number dips below 7 percent.

He projects the GDP to grow 7.1 percent in the first quarter, down from 7.3 percent for the fourth quarter last year.