The Chinese yuan : Influence of interest groups examined

Abstract

In this paper, we provide an analysis of various interest groups in trying to affect the exchange rate determination and the direction of exchange rate policies in China. Given that the People’s Bank of China is not an independent central bank, additional actors such as the Ministry of Commerce (MOFCOM), Ministry of Finance (MOF), the National Development and Reform Commission (NDRC), the State-Owned Assets Supervision and Administration Commission (SASAC) all have incentives to influence the Politburo Standing Committee (PBSC) as well as the relevant Leading Small Groups (LSGs). To enrich the discussions on the political and institutional aspects of the yuan, we also provide an economic lobbying model incorporating imperfectly competitive tradable sectors to shed light on our unique case of Chinese currency determination and exchange rate policy in the presence of these interest groups.