In the process of China's foreign exchange reform, the so-called swap market was a key element. Despite the problems it caused, notably those associated with a dual exchange rate, the paper argues that the swap market proved to be a useful transition mechanism for China's foreign exchange...

In examining China's exchange rate policy in the reforming years, the paper finds empirical evidence of its long-run inflationary consequences, but the effects appear to be not sizable. In the short-run, while changes in the devaluation rate are positively correlated with the increase in the...