China needs to roll out important banking reforms that Chinese Prime Minister Wen Jiabao said would hopefully rectify flaws in the distribution of much-required private capitals.

Mr Wen, who retires in 2013, admitted that China's four major banks were virtually enjoying a monopoly-like structure, in which they only extend loans to preferred firms - those backed by the government - to protect their profits.

In fact, Mr Wen said, these financial institutions were not sweating too much in reaping huge earnings, according to reports by the Chinese state media.

"Our banks are making a profit too easily ... because a few big banks are in a monopoly position," Mr Wen was quoted as saying by Agence France-Presse (AFP) on Thursday.

The Chinese premier has conceded too that under the present set up, small firm have small chance of competing against the country's giant corporations since "only when we approach these banks can we successfully get loans, if we go to other places it is very difficult."

Little access to badly-needed funds means little chance of ever flourishing for small businesses in China, the Chinese leader said.

On that note, Mr Wen called for the dismantling of the monopoly, which he stressed should be the most effective way of easing the flow of "private capital into the financial system."

The whole effort comes with strings of reforms that hopefully would also erase the current struggles of small Chinese entrepreneurs, who in the current set-up have been forced to secure loans from underground lenders and in the process endure the payment of much higher interest rates, Mr Wen said.

Apart from breaking the dominance of few banks in China, Mr Wen said he will work on implementing new regulations that would encourage state-owned banking institutions to provide loans to smaller firms.

Also, privately-owned companies that require more funding for expansion will be authorised to issue corporate bonds that will allow them to raise the necessary cash flow, the Chinese premier said.

The planned reforms were unveiled amidst the projected cooling down of the Chinese economy this year, with Beijing announcing in early March that economic growth will be set at 7.5 per cent, coming from the accelerated expansions in the past two years.

China grew by 10.4 per cent and 9.2 per cent respectively in 2010 and 2011, AFP said, and the lower growth target for 2012, according to Beijing, was deliberately adopted to guide the economy into a soft landing.

Heading into the opposite direction, economists said, could significantly impact on the domestic situation as well China's international trade activities, where the country plays a crucial role due to its strong demand for commodities.

Australia supplies much of its commodities exports to China in the form of iron ore and coal and presently counts the Asian economic behemoth as its biggest trading partner.