【正文】 Council allowed to swap actual foreign exchange among themselves in 1986, whereas in the SEZs, FFEs were even allowed to swap with domestic institutions. The swap price was determined by buyers and sellers through negotiations. With the rapid development of the foreign exchange swap market in 1986, a dual exchange rate system of the official exchange rate and swap market rate reemerged in China. The swap market became an increasingly important tool to offset the distortionary effects of the overvalued official exchange rate and ensured the dynamism of the export sector. After ‘‘June 4’’ 1989, the authorities adopted very strong measures to rein in the economy, tightening credits and raising interest rates. The inflation rate dropped and the trade balance moved into surplus by 1990. Two major devaluations led to a considerable narrowing of the gap between the swap rate, the black market rate, and the official rate. The swap rate had now bee an important signal of macroeconomic performance. The improving situation set the stage for eventual convertibility of the RMB as the authorities gained confidence and experience in macroeconomic stabilization. After 1991, the Chinese moary authorities, on different occasions, repeatedly announced that a major goal of China’s financial reform was to make the RMB a convertible currency. In 1993 while negotiating China’s entry into the General Agreement on Tariffs and Trade (GATT) the Chinese government made a formal mitment to the international munity that by the year 2020 it would achieve RMB current account convertibility. In 1991, China started the fourth round of foreign trade reform. The core of this reform was to abolish export subsidies. The authorities also took measures to streamline and further rationalize the foreign exchange retention scheme. By the end of 1991, domestic individuals were officially allowed to participate in swap market transactions. Restrictions on the sale of foreign exchange by domestic individuals in the swap market were removed. Thus, after December 1991 there were virtually no restrictions on the sale of foreign exchange in the swap market. The volume of foreign exchange transactions in the swap market grew markedly and the number of foreign exchange swap centers proliferated. In 1991, the total volume of transactions was $ billion, an increase of 51% over the previous year. In 1992, it reached $25 billion. By 1993, there were 108 foreign exchange swap centers across the country Before 1991, the swap market rate was applied to about 50% of China’s foreign exchange transactions, but after 1991, the share rose to 80% Thus, the foundation for future exchange rate unification was already established. 4. Exchange rate unification and achieving the current account convertibility In November 1993, the Third Plenum of the Fourteenth Party Congress formally adopted a reform model of establishing a socialist market economy. Soon thereafter it began implementing its most prehensive reform package yet, covering major aspects of the economy including taxation, banking, foreign exchange, foreign trade, investment, and stateowned enterprises (SOEs). In fact, these measures, largely paved the way for China’s eventual accession to the WTO in November 2020. In the area of foreign exchange, the most prehensive reform of the official exchange rate system was adopted since the inception of economic reform in 1979. The RMB official and swap market rates were unified at the swap market rate per US$ that prevailed at the end of 1993. The foreign exchange retention scheme was abolished and the foreign exchange swap business for domestic enterprises terminated accordingly. Under the new system, domestic enterprises were required to sell all their foreign exchange receipts to designated foreign exchange banks. Foreign exchange controls on imports were also abolished. Domestic importers could purchase foreign exchange needed for imports through designated foreign exchange banks upon presentation of import contracts and valid mercial documents. Foreign exchange reform gained new momentum in 1996. In March, the SAFE started to experiment with a system of allowing FFEs to purchase and sell foreign exchang through designated foreign exchange banks in Jiangsu, Shanghai, Shenzhen, and Dalian and to allow foreign funded banks to provide such services to FFEs (but not domestic enterprises). After some modifications, a new system for the surrender, sale, and payment of foreign exchange was extended nationwide on July 1, 1996. Forward contract arrangements with the BOC as the counterparty were permitted with trading mencing in early 1997. The maximum maturity of 4 months was later extended to 6 months. In addition, measures were taken to reduce trade barriers。 Section 4 focuses on the rapid development of the foreign exchange swap market