Short-term deterrence and backlash: China’s anti-corruption campaign and Guanxi in household lending

This paper investigates the impact of China’s 2013–2017 anti-corruption campaign on loan applicants’ use of personal connections (guanxi) to secure loans and their perceptions of the importance of such connections. Using a difference-in-differences design and data from the China Household Finance Survey, we find the campaign only temporarily reduces approved applicants’ reliance on connections. Moreover, high enforcement intensity triggers a backlash: in regions with weaker anti-corruption efforts, rejected applicants are less likely to attribute loan denials to ‘lack of guanxi’. Conversely, in regions with stringent enforcement, applicants become more convinced that guanxi is crucial for securing loans.