Premier Zhu Rongji has instructed that medium and small state enterprises should spearhead development in the coming five years.
In an internal speech, the Premier asked national and local banks to give more loans to such units, which had been neglected by the authorities.
'Zhu has scolded bankers for sticking to tradition and automatically giving preference to large state enterprises,' a party source said.
'All along, financial institutions have ignored medium and small enterprises partly because their owners lack political connections.' The Premier also has asked the Governor of the People's Bank of China, Dai Xianglong, to encourage more 'independent' credit assessment companies to be set up.
These would help banks assess loan applications from medium and small firms.
The party source said having wrestled with the reform of large government firms for most of his career, Mr Zhu had decided it did not make economic sense to continue giving them as much preference as before.
The Premier said the more efficient among the big enterprises should raise funds in the two stock markets, which are enjoying bull runs.