That firms actively influence public policy to advance private interests is taken for granted in most economies. In China, the activism of public actors in shaping private interests suggests that the public rather than private sector is more influential to the political economy. In this paper, we test the extent to which this is true in among Chinese provinces. We conduct a cluster quasi-experiment using the 2012 anti-corruption campaign. We find that the declining involvement of public actors in economic decisions during the campaign did not result into lower productivity in provinces with higher private sector participation, especially in unregulated industries and those not dominated by state-owned enterprises. De facto political power from 30-years of private wealth accumulation may have helped establish market-driven norms of economic behavior, strengthening the political economy against the vicissitudes of public actors.

We exploit an exogenous change in the coverage of insured deposits following the passage of the Emergency Economic Stabilization Act (2008) to investigate the impact of deposit insurance on the volume, composition and quality of credit union lending. Using a difference-in-difference approach, we find changes in the volume, composition and riskiness of credit union lending. Specifically, we find that affected credit unions increase total and unsecured lending, leading to a decline in loan quality. Overall, our results suggest that an increase in the maximum coverage of insured deposits induces credit unions to lend more at the expense of loan quality.