China to intervene in stocks ahead of annual policy meeting

China intervened to support its stock market on Friday, helping the benchmark index cap its best weekly gain of 2016 before policy makers meet to approve a five-year road map for the economy, according to two people with direct knowledge of the situation.

State-backed funds bought primarily bank shares, while some local branches of the securities regulator asked listed companies, mutual funds and brokerages to stabilize the market during the National People's Congress and the Chinese People's Political Consultative Conference, said the people, who asked not to be named because the matter isn't public.

China's biggest banks, seen as prime targets for state support because of their large weightings in benchmark indexes, paced gains in the $5.5 trillion market on Friday even as small-capitalization shares tumbled. Authorities have been known to intervene in markets before key national events, with government funds stepping in to boost share prices last August before a military parade celebrating the 70th anniversary of the World War II victory over Japan.

"It looks like the national team has been buying as large caps of the Shanghai index jumped, while small caps fell," said Steve Wang, chief China economist at Reorient Financial Markets Ltd. in Hong Kong. China's stock market has become one of the most visible symbols of anxiety toward Asia's largest economy after a $5 trillion crash last summer rattled global investors. By publicly intervening to support equity prices in 2015, President Xi Jinping's government has staked some of its credibility as a steward of the economy on the state's ability to stabilize one of the world's most volatile markets.

The Shanghai Composite Index rose 0.5 percent on Friday, reversing an earlier decline of 1.8 percent and extending this week's gain to 3.9 percent. The large-cap CSI 300 Index advanced 1.2 percent, while the ChiNext gauge of smaller companies tumbled 5 percent.

The China Securities Regulatory Commission didn't immediately reply to a faxed request for comment.

A gauge of financial stocks climbed the most among 10 industry groups. Industrial & Commercial Bank of China Ltd., the most valuable company listed on mainland exchanges, jumped 4.4 percent in its biggest gain in four months.