Chinese shares rallied on Friday for a second day in a row possibly indicating that Chinese markets are breaking out of correction levels and heading upwards. But analysts and insiders are saying that the rally in the last two days were being supported by authorities in Beijing to ensure that the public is calm ahead of a significant holiday next week in the city.

The benchmark Shanghai Composite Index increased by 148.76 points, or 4.82%, to 3,232.35. The Shenzhen Composite Index, which tracks stocks on China's second exchange, rose 5.4%, or 94.61 points, to 1846.83. The ChiNext Index, which tracks China's NASDAQ-style board of growth enterprises, gained 6.26%, or 122.63 points, to close at 2082.12.

Global investors glossed off official data showing a 2.9% annual decline in China's July industrial profits. The report was "less awful than expected," says Bill Adams, senior international economist at PNC Financial Services, in a note.

"China's mining and steel industries are undergoing a deep correction; the rest of the industrial sector looks weak but not terrible. While risks are to the downside for growth, these data could be consistent with headline real GDP growth of 6.5 percent in the second half of 2015."

In one unpredictable and wild week, China became the centre of a global sell-off, with a five-session drop starting last Thursday causing major losses in US and European markets.

To silence concerns about its slowing growth, Beijing took several significant measures this week to get its economy back on track, including an interest-rate cut and liquidity injections. The move follows a decision earlier this month to devalue the renminbi, which could make exports more competitive, as China struggles to meet its growth target of about 7% for the year.

The momentum from Thursday extended into Friday. But some analysts suspect that authorities want to give investors something to be happy about ahead of a parade commemorating the 70th anniversary of World War II next week. Indeed early in the session there were rumours that the China Securities Financing Corporation, the agency responsible for arranging margin financing to purchase Chinese stocks, were looking to raise 1.4 trillion renminbi (US$219 billion) in funding in order to facilitate yet another stock market rescue.

"If the 'National Team' has returned to the stock market, it does seem poorly timed," writes Angus Nicholson, an analyst at IG, referring to the team of government agencies, state-backed companies and stockbrokers that ostensibly steps in to fix the market. "Earlier action could have halted the record losses seen since last week, but any action now would upset the market finding its own natural bottom, which would be far healthier for the index in the long term. Market intervention seems to be an itch that is difficult not to scratch."

The major effort to prop markets is part of a broader initiative to ensure that the parade runs smoothly, which authorities will use to show the world in increasing military strength. Beijing has been planning the parade for once, which will provide President Xi Jinping an ideal opportunity to show the globe his control over the People's Liberation Army.

But some analysts believe that China's two-day rally is not a trend. David Cui, China equity at Bank of America Merrill Lynch says that the recent rebound in Chinese stocks will not last long since the state's intervention is too expensive to maintain and that the valuations are still too high in the country's slowing economy.

"There still aren't enough genuine buyers in the market so the government is really the buyer of last resort. As soon as people sense the government's resolve to hold up the market is weakening, investors will dump stocks," says Cui in Singapore.