Abstract: The anti-corruption campaign of the 18th National Congress of the Communist Party of China (CPC) significantly changes firms' political connections. In this study, we empirically examine how this transformation of government-business relationships affects firm performance. We find that firms' expense for building up political connections has negative impact on their performance. The Anti-corruption campaign has destroyed the old pattern of government-business relationships, and created a fair competitive environment. The performance gap among firms with different level of political connections has been narrowed, because firms with higher level of political connection has made better use of their available resources, especially for the private listed firms. In addition, we find that the anti-corruption campaign has significant negative impact on the performance of all firms, probably indicating the phenomenon of government officials' sloth administration after the anti-corruption campaign. Last, we find that firms have significantly increased their R&D expenses after the anti-corruption campaign; but there is no significant evidence that the increased R&D has improved firm performance.