Unknown remote connections to SMTP server - email

I would like like guidance regarding an issue we are having on our CentOS server.
Just recently we noticed that we cannot send emails to Hotmail.com mailboxes from our domain email. I also discovered that we're getting a lot of mail delivery failure emails in one of the inbox's that we don't use.
I've checked the mail logs and saw some suspicious activity. Unfortunately, I don't know much with regards to mail server and how they behave. Can someone shine some light on this situation and tell me if some is connecting to our SMTP server remotely and sending spam emails to various recipients? What other steps should I take to prevent this?
Here is part of the log:
2013-06-09 05:43:27 SMTP connection from [110.52.1.237]:13088 (TCP/IP connection count = 1)
2013-06-09 05:43:32 no host name found for IP address 110.52.1.237
2013-06-09 05:43:41 SMTP connection from [110.52.1.237]:13461 (TCP/IP connection count = 2)
2013-06-09 05:43:46 no host name found for IP address 110.52.1.237
2013-06-09 05:43:46 unexpected disconnection while reading SMTP command from (iem.net) [110.52.1.237]:13088
2013-06-09 05:43:55 H=(qbnngj.com) [110.52.1.237]:13461 sender verify fail for <wqnsjzyyc#qbnngj.com>: The mail server could not deliver mail to wqnsjzyyc#qbnngj.com. The account or domain may not exist, they may be blacklisted, or missing the proper dns entries.
2013-06-09 05:43:55 H=(qbnngj.com) [110.52.1.237]:13461 F=<wqnsjzyyc#qbnngj.com> rejected RCPT <support#greenXXXX.com>: Sender verify failed
2013-06-09 05:43:55 unexpected disconnection while reading SMTP command from (qbnngj.com) [110.52.1.237]:13461
As you can see above, the IP that connected to the SMTP server is from China. I have a dozen of similar connections made in the log.
I am not sure how to resolve this issue.
Any help would be appreciated.
Thank you,
Max

You have two separate problems.
Sending to Hotmail: They have a web page regarding their own private white list, and if you're not on the list, you get blocked.
Receiving delivery status notices for messages not sent: Someone is spoofing your domain in messages they're sending to others. You need to protect your domain with some authentication technology. The two most common are called "sender policy framework" and domainkeys.

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In Event Viewer I get:
Message delivery to the host 'IPADDDRESS' failed while delivering to the remote domain 'MYDOMAIN' for the following reason: The connection was dropped by the remote host.
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Error: Expecting "220". Server is not accepting connections.
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Solution was simple - we originally specified the mail server in the cfadmin mail settings, but included no username/password. That worked fine, until we wanted to start sending cfmails to addresses outside of our own domain. So IT created a dedicated "Noreply" account for this purpose, and I entered the username/password in the cfadmin mail settings.

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I've been trying to install a Postfix server for handling mail for my domain. I found some nice tutorial and I was able to create email address and server responds correctly with telnet (imap and pop3 included, I also charge the config in Gmail and works correctly).
To handle POP3 and IMAP I have installed Courier
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Action: failed
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myself
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Thanks for your attention and your answers
You're probably sending mail to a recipient, with an email address in a zone which has an MX record, with its value a hostname, which resolves to the ip address of your mailserver, while this your server hasn't been told in its main.cf config file (behind mydestination), that it is referring to itself.
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Update mydestination accordingly.
It helps to use the same hostname for MX record, for all zones your mailserver handles incoming mail for, as that keeps your mydestination manageable.

SMTP Mail Failures to a certain domain

Do the SMTP logs on a server (Windows 2003) only show logs of mail that were sent successfully?
We are getting bounce backs when sending mail to a particular domain:
The connection was dropped by the remote host.
It looks like a problem on the receiving server, but we dont have much information to provide them. We can send to hotmail, gmail, yahoo etc OK.
Any ideas?
Most likely, there is a spam filter in front of the receiving mail server for this domain, and this spam filter thinks your mail server is sending spam, so it's closing the connection from your mail server. One way to test this is to simulate sending a message to this mail server by opening a command prompt on your mail server, and use telnet to connect to the receiving mail server on port 25, and proceed with the process of sending a message just as a mail server would. This way, you'll be able to see how the receiving mail server responds after each step. Follow the instructions in http://support.microsoft.com/kb/153119 to see how this is done.
It turned out the sending server was blacklisted by McAfee, that was running on the receiving servers firewall.
For those that may have the problem in the future you can check if your server is blacklisted with McAfee here:
http://www.mcafee.com/threat-intelligence/ip/spam-senders.aspx
After entering your server IP, you should see a link Threat Feedback. Use this to email McAfee.
I was able to send McAfee an email with an explanation, they then removed our server from the blacklist.

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Another thing you can do is use port25's verifier tool. This tool will spot any red flags that might be causing your messages to be flagged as spam. See http://www.port25.com/support/authentication-center/email-verification/ for more info.
Last but not least, you might want to setup an SPF record for the domain that you are sending these messages from, to indicate that the IP of your mail server is authorized to send mail from this domain. This will help a lot. For more info, see: www.openspf.org.