China's banking watchdog said on Dec. 14 the sector will strengthen risk prevention and step up support to small businesses.

The banking industry should strictly stick to the bottom line in preventing risks and continuously improve the ability of risk control, said Shang Fulin, head of the China Banking Regulatory Commission (CBRC), in a statement.

Commercial banks should provide better support to small and micro-sized enterprises, as well as development of rural areas, agriculture and the country's midwest region, he said.

Chinese authorities have called for more credit support for small businesses, which create 80 percent of the country's jobs, in a time of tightened monetary supply aimed at curbing inflation.

Small companies have difficulty borrowing from banks, who prefer to lend to larger companies for fear of bad loans.

In several cities including Wenzhou in eastern China, some small firms have turned to the high-interest informal lending market but many later have found they can not repay the loans due to bad economic conditions and investment losses.

The government has called for better regulation of private lending and a tougher stance against such crimes as illegal fundraising, usury and money laundering.

The CBRC should continue to crack down on illegal financial activities, Shang said.