GUIYANG - Private businesses should concentrate on their core business in the manufacturing and service sectors rather than trying to speculate in the capital market as new policies will give them more support, the head of China's top business association said.

"Many private business owners are straddling the fence at the moment, but I believe they will begin to see brighter prospects as long as they understand the country's macroeconomic policies," said Huang Mengfu, chairman of the All-China Federation of Industry and Commerce, at the association's executive committee conference on Wednesday.

"It's time for large private companies to shift their focus to environmental protection, advanced technologies, and social well-being, as well as move into the western provinces, where the growth rates for the economy and investments will be much higher compared with the coastal region," Huang said.

The government also plans to give more support to small businesses, which employ between 60 and 70 percent of the workforce in China, he said.

"One of the policies might be to support manufacturing and service businesses in the next year, to help whet domestic demand and offset the difficulties many exporters are faced with," Huang said.

"Industries that manufacture goods and provide services will remain the pillar of China's economic growth in the coming years. Private businesses should therefore concentrate on those things and on their long-term prospects for development, rather than staking everything on the vicissitudes of the financial market."

Huang's comments came after Vice-Premier Li Keqiang, speaking this past week at a meeting with the National Development and Reform Committee, called for more private capital to be invested into railways, infrastructure and social causes.

Huang said more should be done to encourage private companies to keep their business in the production of goods and provision of services. For a start, the financial industry should be reformed, he said.

"The trouble with Chinese banks is that they are making too much money," he said.

According to Huang, in the first three quarters of 2011, the profits of listed Chinese financial institutions accounted for 50.4 percent of the profits made by all listed companies in the country. The US financial sector, in comparison, only accounts for about 40 percent of all US profits.

The prospect of making so much money has drawn many enterprises other than banks and other traditional lenders into the financing business in China. The value of the loans made by this "shadow banking system" now stands at 11.5 trillion yuan ($1.8 trillion), according to reports.

If accurate, that figure accounts for more than 10 percent of the loans made by the entire banking system.