Comparison Of The Chinese Foreign Exchange Market Before And After The System Of Exchange Rate Innovation

The reformation of Chinese Foreign Exchange Market (CFEM) began in 1994. These years, in the backgroud of the grooming world business and the paticipation of WTO, it is so nessesary for furthering the innovation of CFEM. In July 21th, 2005, People's Bank of China regenerated the system of foreign exchange rate, and since then on, the government carried out a series of related policy to improve the CFEM. This dissertation reviews the procss of the development of CFEM, and firstly uses the Efficient market hypothesis (EMH) to analyse the validity of CFEM before 2005, and the result sprovide evidence against the weak form CFEM. After that, the comparison of the enviroment of CFEM before and after the innovation is made, and what blocks the efficiency of the market is analyzed. Based on the application of EMH to the foreign exchange market and microstructure of foreign exchange market theory, the last part of the paper puts forward how to improve the efficiency of China foreign exchange market.