In a report titled "Hong Kong, is spring far away?", Dong Tao, chief regional economist of Credit Suisse First Boston (CSFB), pointed to three areas that make him feel more positive about HongKong.

He said the cost base in Hong Kong has declined substantially in the past five years. Rents for grade-A office space in Hong Kong are now comparable with regional peers, like Singapore and Shanghai. Commercial space rents, down 39 percent form the end of 1997, should support job creation. Wages rates are also down significantly.

He stressed that Hong Kong has quietly become a cheaper place to do business.

In addition, Hong Kong's low tax rates, wolrd-class infrastructure and the rule of law are added merits to multinational corporations seeking an Asian operation base. That explains why Hong Kong sees continued rise in multinational corporation registration.

Dong Tao said wage correction has been accompanied by rising productivity. According to a CSFB estimate, Hong Kong's real productivity, as a factor of GDP per worker per hour, has improved 9 percent since 1998.

He said that improvement in cost structure not only helps existing business, but may also nurture new ones. The fall in retail rents is particularly important, as self-employment in the retail sector has been the main driver in absorbing the newly unemployed.

While growth of companies may not return for a while, bottom line improvements should surface soon, the economist predicted.

Tao believed that the SARS outbreak, which is causing big damages in Hong Kong, is unlikely to have a lasting impact on the fundamentals.

(Xinhua News Agency May 10, 2003)