This study proposes that interest groups in authoritarian regime can influence the policymaking process through their political connections with government officials. Using this analytical framework, we firstly conduct a case study to show the presence and formation ways of political connections between a Chinese interest group - the real estate developers in Shanghai and an influential political faction - Shanghai Gang. Direct evidences support that with the help of Shanghai Gang, the interest of the real estate developers in Shanghai was preserved inasmuch as the tightening of monetary policy was precluded in response to Shanghai's overheated property sector. Then, based on the time series data from November 2002 to February 2011, our empirical testing confirms that even though the ce...[ Read more ]

This study proposes that interest groups in authoritarian regime can influence the policymaking process through their political connections with government officials. Using this analytical framework, we firstly conduct a case study to show the presence and formation ways of political connections between a Chinese interest group - the real estate developers in Shanghai and an influential political faction - Shanghai Gang. Direct evidences support that with the help of Shanghai Gang, the interest of the real estate developers in Shanghai was preserved inasmuch as the tightening of monetary policy was precluded in response to Shanghai's overheated property sector. Then, based on the time series data from November 2002 to February 2011, our empirical testing confirms that even though the central government tightens its monetary policy to tame the overheated property sector, the policy response to Shanghai's property sector is remarkably precluded by the power of Shanghai Gang. Our results remain robust after using different econometric models, controlling more variables and employing alternative estimation strategies.