Hong Kong nourishes inflation virus, property and CNY speculations in China

Are you surprised to hear this: Hong Kong is the nourishing ground for inflation viruses, property and Chinese Yuan speculations in China? You may not believe it but I think our Central Government is or should be fully aware of the situation and the risks involved. That should be one of the main reasons why our Central Government would not like to see the testing of full convertibility of Chinese Yuan (CNY) in Hong Kong nor the so-called merger of the HK Exchange with Shanghai/Shenzhen Exchanges. I venture to speculate the nature and causes of the problems:

• You can hardly find a financial centre like Hong Kong where interest rate is so low or so cheap! I mean deposit interest rate for HKD and to be more specific, the deposit rate for ordinary people like you and me in Hong Kong. For a deposit of over HKD500,000, the usual rate will be as low as 1-1.5% p.a. and that is already the rate for short-to-medium term time deposit! What is the point of saving your hard-earned HKD in the bank?
• To further diminish your wealth, HKD is depreciating rapidly as it is still pegged to USD. HKD is sinking against CNY, Euro, A$, Can$, NZ$, S$...The only exception may be the Japanese Yen but that may also change once BOJ agrees to raise interest.
• As expected, inflation in Hong Kong is jumping everyday particularly when our local government is doing nothing to help (some even say inflation is good for Hong Kong). Very soon, inflation will fly above 4-5% and I am sure the livelihood of ordinary people will be adversely damaged. When you place such inflation side by side with a rapidly depreciating HKD and a cheap or insultingly cheap deposit rate, you will clearly get negative interest, negative value for HKD, negative return for your salary increase (if any), and of course, negative living standard! I need not tell you that the price of our food from Mainland has risen over 10% while our HKD has fallen against CNY by almost 10%. When will we have an anti-inflation demonstration in Hong Kong? See whether we can have one in the Christmas or New Year holidays.
• But you need not worry we may see any demonstration. Why? I bet that many people in Hong Kong are not aware of how unfairly they are treated by the banks despite getting pitifully cheap deposit rate. People elsewhere can have a fairer return for their hard-earned money. You may easily get 4-5% in US, 3-4% in EU and in less than an hour's travel, 6-7% for CNY deposit in Mainland China. But we are very happy with or without deposit interest here. This is one of the major features of our local consumer culture: Exploit me but I am still happy!
• With the above background, it won't be difficult to understand why people in Hong Kong are pouring capital into Mainland China by buying properties in places like Guangdong (even prices are skyrocketing) or exchanging for CNY everyday. You may say people in Hong Kong are forced to speculate on properties and the CNY appreciation in China. We have very little choice if we want to survive!
• Now who are the snakes behind all these? I believe they are the sinking USD and the anarchronistic peg of HKD and USD! Those who are supporting such "system" are the ultimate true beneficiaries and they are always staying in the Garden of Eden. Look at heaven and you will see the fat banks, the cheerful landlords, the happy estate agents in Hong Kong, Shenzhen, Guangzhou, ... And never miss our Hong Kong government: they are earning infinite revenues from our skyrocketing land prices, our stock market bubble, the fat profits of our banks and landlords...

By the way, you may not have been informed that the local government will charge additional tax on every plastic bag very soon. I may be wrong but again I have no doubt that such tax will not help to improve the local environment but will just be a substitute for the badly rejected "sales tax" thrown out by all of us last year.

I hope little guys like you and me will all pray that Santa Claus will go to discuss with our Central Government about the problem that negative interest and negative HKD exchange rates in Hong Kong are actually some of the major enemies of an overheating economy inside China. If the Sino-US trade deficits and the overheated Chinese economy are caused by CNY (as our US friends are alleging) or (as our Central Government has explained) the devaluation of USD, Hong Kong is breeding or nourishing the same problems.