Beijing, Apr 5 (IANS): China's top leadership has agreed to reduce, if not break, the state's banking monopoly, Premier Wen Jiabao has said.

This is the first time Beijing acknowledged the monopoly of state-owned banks following last month's announcement of a pilot project to reform the financial sector in Wenzhou, an eastern coastal city.

Wen made the announcement in Fujian province, China Daily reported Thursday.

Economists have long complained about lack of progress in reform of the state-dominated banking and financial industry and of inadequate service for the country's large number of small and medium-sized enterprises.

"Regarding raising funds for your businesses, I think it has been too easy, quite frankly, for our banks to make profits,: Wen told businessmen.

"The reason is that a small number of large banks are in a monopolistic position. It is only from them, and nowhere else, that companies get the loans they need.

"This is why we've now come to make way for private capital to enter the financial services sector, which ultimately requires breaking monopolies.

"There is already a consensus among the central leadership, which is reflected, as you can see, by the pilot reform in Wenzhou."

The Wenzhou reform was announced by a State Council executive meeting on March 28. It allows private financial services, including setting up village banks and rural financial cooperatives.