China's central bank has lifted its re-lending quota by 50 billion yuan ($7.25 billion) to boost financial support for small and private businesses and support economic growth.

The move came after China's top leadership vowed to encourage financial institutions to increase medium-and long-term financing to manufacturing companies and private firms at a key meeting held on July 30.

The re-lending quota will be granted to five types of local financial institutions－city commercial banks, rural commercial banks, rural cooperative banks, village banks and private banks, the People's Bank of China said in a statement on July 31.

The decision was seen by analysts as a direct response to the central leadership's order to solve the persisting problems of credit shortage and high financing costs for small and private businesses.

Since the beginning of this year, the central bank has enhanced financial support for small businesses, with outstanding re-lending loans reaching 226.7 billion yuan by the end of June. After the increase, the country's re-lending quota supporting small firms amounted to 369.5 billion yuan.

Re-lending is a monetary tool used by the central bank to increase financial institutions' liquidity and guide credit flows.

A meeting of the central bank on July 31 also urged lenders to improve their credit structure and asked them to "reasonably control" credit allocation to the property sector and boost financial support to micro companies, advanced manufacturers and high-tech firms.

Cao Chao, an analyst at Huatai Futures Co Ltd, said that the increased re-lending quota will make banks' credit provision "more targeted" and will help reduce smaller businesses' financing costs.

A survey of more than 500 small-and medium-sized enterprises nationwide in China by Standard Chartered showed that business sentiment softened in July and their investment appetite weakened due to falling profits and rising uncertainties amid a slowing economy.

However, credit conditions for small businesses improved, driven mainly by better bank credit access for SMEs, the survey found.

"The reading for banks' willingness to lend to SMEs rose to 60.4 in July, reversing the downward trend in the second quarter. This suggests that commercial banks likely enhanced credit support to SMEs again, after the surge in the first quarter," it said.

Despite the improved credit conditions, borrowing costs for SMEs remain elevated and their cash flow is still under pressure, pressing for moves to lower real lending rates for SMEs, the survey said.

The official purchasing managers' index for China's manufacturing sector also showed a divergence in the activities of big companies and smaller ones in July. The reading for large companies rose to 50.7 while the index for activities of SMEs dropped.

"The indicators of the performance of smaller companies were more volatile than that of the large companies, meaning that there are still a lot uncertainties in the operating environment for smaller firms and there is still a lack of business confidence. Future policies should continue to offer more support to them," Wu Chaoming, vice-president of the Institute of Caixin International Economics Co Ltd, said in a research note.