China is urging banks to loosen up lending to small businesses, which account for most of the country's job growth but have been hard hit by tight money policies aimed at slowing inflation.

The official Xinhua news agency says Premier Wen Jiabao raised the issue this week during a visit to eastern Zhejiang province, a hub of economic activity.

Xinhua quoted Mr. Wen saying banks should set targets for increased lending to small businesses, reduce the cost of securing credit and tolerate a higher ratio of non-performing loans.

Chinese media say a number of small businesses have been forced to shut down or turn to underground lenders as a result of the inflation-fighting measures. Xinhua says small companies account for 80 percent of China's jobs.

China has taken steps in recent months to reduce bank lending in a bid to slow inflation, which has been running at more than 6 percent.

Those steps include a series of interest rate hikes and increases in the amount of cash that banks must hold in reserve.