AS CHINA'S central bank struggled to try and stabilise the country's currency last week, the Shanghai swap market was thrown into confusion as daily turnover dropped from US$81 million to just $1.4 million. Following a series of administrative orders from the Swap Centre to brokers, aimed at trying to maintain a strong yuan, the trading volume on the Shanghai swap market dropped sharply mid-week. The Shanghai Swap Centre, which comes under the direct control of the People's Bank of China, instructed all swap brokers to submit applications for transactions 24 hours before exchanging yuan into foreign currency. The move is seen by many as an attempt to try and curb the buying frenzy for US dollars. There are 100 swap centres in China. Shanghai is the biggest, accounting for 16 per cent of total turnover. Last Tuesday, about $81 million was exchanged on the Shanghai market, but by Thursday it had shrunk to just $1.4 million as the measures imposed by the People's Bank of China dampened the market. The People's Bank has also reduced trading time to just 45 minutes a day. Meanwhile, the vice governor of the People's Bank, Zhu Xiaohua, said yesterday that Beijing was determined to maintain the yuan's current parity of 8.5 to the US dollar. Chinese brokers claim the People's Bank is creating a false market in he currency. Mr Zhu, who was appointed by China's Vice Premier Zhu Rongji, made the comment in Shanghai in a closed-door meeting with the Central Bank's officials, the State Administration of Exchange Control and brokers. He urged brokers ''to convince their clients of the determination'' of China's monetary authorities. China's limited-access swap markets are for companies needing foreign currency for their operations. The swap rate was set at 8.2 to the US dollar before being liberalised on June 1. The yuan collapsed to a low of 11 to the US dollar soon after being allowed to float. But, it soared to 8.5 three weeks ago when Vice Premier Zhu Rongji was appointed Central Bank governor. It is understood that Beijing is determined to keep the yuan below nine to the US dollar in the short-term, and 7.8 in the long-term. Sources at the Shanghai swap centre said the central Bank had planned to inject $2.5 billion to stabilise the swap rate. According to the sources, Beijing pumped $40 million into the market on Monday. The rate closed on Monday at 8.5 yuan to the US dollar, with a turnover of $64.94 million. On Tuesday, a further $75 million was pumped into the swap market with the yuan closing at 8.49 to the dollar on a turnover of $81 million, making it the biggest single-day turnover in Shanghai since the centre was officially opened in 1988. On the same day, the Swap Centre stated: ''Because of the increasing transactions, all applications for swap exchanges should be submitted one day in advance in an effort to increase the working efficiency at the centre. Any transactions which do not follow the rule will not be processed.'' Thursday's trading dried up to just $1.4 million, closing at 8.5060 to the US dollar. (The centre was closed on Wednesday). Friday's turnover was $5.87 million, closing at 8.534. A broker at the centre said: ''The hard-currency buying sentiment is strong. Traders see it as a free gift that the government sells the hard currency at 8.5. ''The situation is tough for us now with 80 to 90 per cent of the applications being turned down,'' the broker said. ''It was never like this before. We can't buy any hard currency at 8.5. It is a false market,'' he added. Over-the-counter swap tradings, which are illegal in China, have become active. The unofficial rate is traded at 9.2. ''I have submitted the application many times. But I still can't buy the hard currency. They have a lot of excuses, such as telling you that the procedure is improper,'' said a businessman, who shopped around outside the centre to swap the yuan at 9.2 last Friday. On Friday, the swap centre tightened the regulation that only brokers are allowed to enter the hall. Before, clients could easily enter the hall with their brokers. Trading time had been between 9.30 am and 11.30 am. Two weeks ago, the centre announced that trading time was being shortened to 45 minutes, from 9.30 am to 10.15 am. Last year, Shanghai handled $4 billion in transactions. As the leading swap centre in the country, Shanghai is the focus of Beijing's tough programme to correct the swap market. Shanghai's swap rate is the guideline for other swap centres. Beijing has signalled it is determined to beat speculators. But the market is concerned whether Beijing, which holds less than $20 billion in foreign currency reserves, will have enough hard currency to stabilise the yuan. On Thursday and Friday, the Central Bank did not intervene in the market. This lack of action confused brokers. ''Its capricious behaviour is baffling,'' one broker said. Vice governors Mr Zhu and Dai Xianglong visited the centre on Thursday. Brokers also held a meeting yesterday with the authority. It is believed that the Shanghai authorities and brokers will soon be given Beijing's guidelines on swap transactions.