The effects of change in the yuan/dollar exchange rate on the Korean economy after the Asian post-crisis period are examined using VAR (Vector Auto-regression) models.A decline in Koreas industrial production in response to a decline in the yuan/doilar rate is found.The forecast error variance decomposition confirms that the yuan/dollar rate long-time shocks in explaining Korean industrial production is substantial during Chinese exchange rate regime pre-reform period,but small during Chinese post-reform period.These empirical results are interesting in that they show the free-floating exchange rate regime instituted since Korean economy cannot insulate from external shocks such as yuan/dollar exchange rate shock.And the reform of Chinese exchange rate regime accountable for fluctuations in industrial production.