Guangdong province will support more small-loan companies, township financial organizations and private equity and venture capital firms to help cash-strapped small and medium-sized enterprises, said a top government official.

"The move is also aimed at curbing rampant private lending in the province, especially in the Pearl River Delta area," said Chen Yunxian, vice-governor of Guangdong.

Small businesses in the province, especially in the Pearl River Delta region, have been under mounting pressure from slowing export growth, rising costs and financing difficulties.

Private lending activities in Guangdong have not been as widespread as in other coastal regions, Chen said.

"The reason is that the vast majority of businesses in the province are real economy entities, which usually solve their financing difficulties internally," Chen said.

"But if the government doesn't act to help small businesses with their financial difficulties, private lending will become a serious problem," Chen said at the annual session of the National People's Congress, the top legislature.

Early last month, Guangdong announced policies to support cash-starved small companies. The policies include establishing development funds to build financing service systems, tax cuts and support for some small firms to list on the stock market.

"The policies are aimed at supporting small companies' innovation and helping them develop new markets," he said.

Local authorities said they would also offer incentives to banks that provide credit for small firms. The authorities also urged banks to establish a credit rating system suitable for small and medium-sized enterprises.

"Private lending, if it's really aimed at supporting the economy in line with the law, will be protected," Chen said.

Premier Wen Jiabao said in his annual Government Work Report that China will extend credit support to enterprises this year, especially micro-sized and small companies that operate in line with industry policies and have market demand for their products.

The State Council said early in February that the government will provide a 15 billion yuan ($2.4 billion) fund and tax breaks for small companies this year.

Yang Haoming, an NPC deputy from Guangdong, said big financial organizations such as Bank of China Ltd and China Construction Bank, which usually lend to large enterprises, should allocate a portion of their annual lending to support small businesses.

"The government should encourage the establishment of designated banks and private commercial banks to support small businesses," he said.

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