BEIJING—China stepped up efforts to boost lending in its flagging economy, with the central bank freeing up new funds and the country’s premier ordering big banks to lend to cash-starved small businesses.

Friday’s moves by the central bank and Premier Li Keqiang, though modest in scope, aim to bolster a weak link in the economy: smaller businesses that traditionally have trouble getting bank credit and whose continued troubles threaten to hamper a turnaround.

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