About 80 percent of small and micro-enterprises in East China's Zhejiang province rely on informal finance, and the average financing cost is as high as 30 percent while the investment reward is just 3 percent for those businesses.

Gu Shengzu, a member of the Standing Committee of National People's Congress, made the observations at a micro-credit conference in Beijing on Tuesday.

He said that all banks favor big enterprises when offering financing services, and this trend helps small-loan companies. The number of China's small-loan companies increased tenfold in the past three years while the loan balance rose six times. Urbanization will create more opportunities for private financing businesses, Gu added.

Gu called for community banks to be in place so that private capital will support private enterprises, and that small and micro-financial institutions will boost micro-businesses.