This paper uses MSIH-VECM model to analyze the regime relationship between black market exchange rate premia and inflation rate in China from 1990 to 2006,showing that the nonlinearity model is better than the traditional linearity VECM model and can captures the structural changes between them.

Based on revealing the nature of sustainable development through analyzing the macroscopic, medium-scopic and microscopic inter regional relationship, this article puts forward some suggestions on how to harmonize the relationship between regions and how to realize the sustainable development in the implementation of western China development strategy.