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China's small firms see profit growth easing, costs rising: ministry

BEIJING (Reuters) - Most of China's small and medium companies have seen profit growth slowing this year as costs rise and financing remains tight, the official Xinhua news agency said on Monday, citing a survey by the Ministry of Industry and Information Technology.

Some of the firms in the survey of over 2,000 were also finding it hard to get enough workers, the report said, adding that more than half complained of rising labor, raw material and financing costs.

"As the backbone of the country's economy, such firms are in urgent need of having their tax burdens cut to alleviate their operating difficulties," Xinhua quoted Zhu Hongren, the ministry's chief engineer, as saying.

The ministry will establish a long-term mechanism to reduce small firms' burdens, though the government has already taken measures to help small companies, Zhu said.

Those measures have included scrapping some taxes, moving to set up specialist financial institutions to lend to small firms and easing restrictions on small firms issuing bonds.

Small- and medium-sized enterprises (SMEs) account for 60 percent of China's gross domestic product and some 75 percent of new jobs created in the country, but they are struggling to cope with weaker global demand and tight credit.

A preliminary survey showed on Monday that China's factory sector grew at its fastest pace in six months in September, adding momentum to a tentative turnaround in the world's second-largest economy since the middle of the year.

(Reporting By Xiaoyi Shao and Jonathan Standing; Editing by Kim Coghill)

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