Chinese stocks closed higher on Tuesday in line with strong service sector data, which signaled an improved economic outlook.

The benchmark Shanghai Composite Index rose 0.14 percent to close at 3,384.32 points, while the Shenzhen Component Index closed 0.22 percent higher at 10,986.95 points.

Combined turnover on the two bourses shrank to 562.6 billion yuan (about 86.06 billion U.S. dollars) from 646.4 billion yuan the previous trading day.

Insurance shares were among the biggest risers, with Ping An Insurance climbing 2.07 percent and China Life Insurance also up 1.49 percent.

A private survey released Tuesday showed that China's service sector growth accelerated in August, hitting a three-month high.

The Caixin General Services Purchasing Managers' Index rose to 52.7 in August from July's 51.5, according to the survey conducted by financial information service provider Markit and sponsored by Caixin Media.

A reading above 50 indicates expansion.

The upturn, combined with acceleration in the Caixin China General Manufacturing Purchasing Managers' Index to a six-month high of 51.6 in August, provides signs that growth in the economy has stabilized after a disappointing performance in July.

The ChiNext Index, which tracks China's NASDAQ-style board of growth enterprises, gained 0.08 percent to close at 1,885.16 points.