SHANGHAI - Stocks on the Chinese mainland rose, driving the benchmark index's biggest gain in two weeks.

The advance came after Premier Wen Jiabao offered more support to smaller companies, and investors speculated that the government will help banks replenish capital.

Industrial & Commercial Bank of China Ltd (ICBC) and China Construction Bank Corp, the country's largest lenders, climbed more than 2 percent after the 21st Century Business Herald reported the biggest shareholder in State-owned banks will accept lower dividend payout ratios. Xinjiang Talimu Agriculture Development Co and Hunan Dakang Pasture Farming Co jumped by the daily limit after the Xinhua News Agency said the government will boost investment in agriculture.

"The government's support for smaller companies is positive given their large share of the economy," said Li Jun, a strategist at Central China Securities Co in Shanghai. "That'll help investors become more optimistic that the economy will hit a bottom soon.'

The Shanghai Composite Index rose 44.48 points, or 2 percent, to 2312.56 at the close, its biggest gain since Jan 17. The CSI 300 Index climbed 2.4 percent to 2486.24. The Bloomberg China-US 55 Index, the measure of the most-traded US-listed Chinese companies, added 1.6 percent in New York.

The Shanghai Composite has climbed 5.1 percent this year, after plunging 33 percent in the previous two years, on speculation that slowing economic growth will push the central bank to relax monetary policies and the government will take measures to support stocks. The measure trades at 9.5 times estimated earnings, near the record low of 8.9 times reached on Jan 6, according to weekly data compiled by Bloomberg.

Wen said the government will support small companies with a 15-billion-yuan ($2.4 billion) fund as growth moderates in the world's second-largest economy.

China will also extend preferential tax policies for small companies until 2015 and will ask banks to increase tolerance of bad loans to these businesses, according to a statement posted on the central government's website on Wednesday, citing a State Council meeting presided over by Wen. The nation's small companies have been hurt by a credit squeeze after the government boosted lenders' reserve-ratio requirements over the past two years.

ICBC, the nation's biggest listed lender, climbed 2.3 percent to 4.38 yuan. Construction Bank added 2.3 percent to 4.85 yuan. Bank of Communications Ltd, part-owned by HSBC Holdings PLC, rose 3.1 percent to 4.93 yuan.

Central Huijin Investment Co, which holds stakes in China's largest banks, may accept lower dividend payout ratios from the lenders to help them replenish capital, the 21st Century Business Herald reported on Thursday, citing an unidentified person close to the regulators. The proportion of cash-dividend payouts may decrease by 5 percentage points from 40 percent of profits now, it said.

ICBC paid out 39 percent of its 2010 profit as dividends, compared with 44 percent in 2009 and 50 percent in 2008, according to data compiled by Bloomberg. Construction Bank's payout ratio dropped to 39 percent in 2010 from 44 percent in 2009 and 49 percent in 2008, Bloomberg data showed.

China's interest-rate swaps fell for the first time this week on speculation a cash shortage will persuade policy makers to cut reserve-requirement ratios for lenders.

Bloomberg News