Highlights from the EO print edition, No. 592, Oct 29, 2012

Hot Money Flows Into Hong Kong 
News, cover
~On Oct 17, the official exchange rate of the Hong Kong dollar against the RMB fell below 80 yuan for 100 Hong Kong dollars for the first time. This is the lowest level since exchange rate reform in 2005. 
~At almost the same time, effects from the US’s QE3 started to emerge, causing an influx of international capital into China. On Oct 20, the Hong Kong Monetary Authority (HKMA) released 14.3 billion Hong Kong dollars into the market. This was the fourth such monetary injection.
~ Before HKMA’s intervention in the foreign exchange market on Oct 20, there was already a lot of money flowing into Hong Kong. According to a Morgan Stanley report, liquidity staying Hong Kong reached 1.56 trillion Hong Kong dollars in August.
~Although the economy is poor, hot money is overflowing and prices continue to rise. Since 2010, property prices in Hong Kong have risen by nearly 50 percent. Compared to the low point during the financial crisis of 2008, housing prices have doubled.
~Besides the real estate market, the stock market is also steadily increasing. The Hang Seng index rose for ten consecutive trading days starting on Oct 10. It was the first ten day growth streak since 2006.
~Guan Chaozhao (关焯照), former Economics professor at Chinese University of Hong Kong, pointed out that Hong Kong’s economic outlook isn’t bright. Mild stagflation has already emerged.  
~The Hong Kong government recently lowered this year’s GDP forecast to 1-2 percent from the original 1-3 percent. Meanwhile, the Hong Kong government has raised inflation forecasts for the full year to 3.7 percent from 3.5 percent. The latest data from the statistics department shows that Hong Kong’s second quarter inflation was 5.1 percent.
Original article: [Chinese]

City Gains Investment Through Weibo
Nation, page 9
~On Oct 13, a Weibo account called ‘The Voice of Suqian’ posted a video about an investment fair. It was reposted 140,000 times in five days.
~It was the first time the city of Suqian in Jiangsu Province tried to attract investment on Weibo. The local government hesitated in using the platform, worrying that there might be negative impacts or the workload could be too large. But the outcome was beyond their expectations. With 197,000 followers, a separate post was expected to be reposted 10,000 times, but was actually reposted 14,000 times.
~During the two months’ publicity for investment, 3,162 enterprises got in touch and 146 projects were signed. 70 enterprises settled in Suqian and the registered capital reached 120 million yuan. Suqian spent only 6,000 RMB on the publicity.
~The campaign on Weibo included discussions, slogans, Q&A and video promotion.
~“The mayor wanted the campaign to be explosive and popular overnight.” said Ma Gai (马盖), chief of the Online Merchants Group of Suqian Software and Service Outsourcing Industrial Park, who was in charge of the investment drive.
Original article: [Chinese]

Urban Investment Bonds Became Popular Again
News, cover
~ Urban investment bonds once again became the most popular on the bond market in the first half of 2012 after a very poor year in 2011.
~ According to Wind information data, the issuance volume of urban investment bonds reached 122 billion yuan in August and 128 billion yuan in September.  The total issuance volume for the whole year in 2011 was only 426 billion yuan.
~ According to data by China Chengxin Information Technology Co.,Ltd., this year the volume of urban investment bonds issued by capital cities of provinces and prefecture-level cities has increased by 9 percent. Those issued by municipalities and provinces decreased by 10 percent and 3 percent respectively.
Original article: [Chinese]

Large Quantities of Substandard Iron Ore Being Imported
~This September, misfortune suddenly struck Lu Tao (陆涛). Lu is the manager of a steel import and export corporation in Shandong Province. He imported 80,000 tons of iron ore from Ukraine, but what he received was too little and of bad quality. Lu’s case isn’t uncommon in the iron ore importing industry.
~ Every year, his corporation imports 5 million tons of iron ore. Before, Australia and Brazil were the major sources, but recently, higher production costs have been pushing Chinese steel enterprises to the brink of bankruptcy. To reduce the cost pressure, they’ve had to revert to importing iron ore of lower quality from countries like India, Iran, Ukraine and North Korea.
~ Currently, 60 percent of China’s iron is imported. In 2011, there was roughly 686 million tons imported. From January to September of this year some 54.3 million tons of iron ore was found to be substandard.
~ China has become the largest iron buyer in the world. After decades of exploring, previously rich deposits in Brazil and Australia are getting mined-out and the quality of iron from large miners is getting worse.
~ Iron ore has been regarded as the root of China’s manufacturing industry. China’s economic security and sustainability of certain enterprises will be directly threatened by the substandard iron.
Original article: [Chinese]