Corruption is one of the most pervasive obstacles to economic and social development. However, in the existing literature it appears that corruption seems to be less harmful in some countries than in others. The most striking examples are well known as the "East Asian paradox": countries displaying exceptional growth records despite having thriving corruption cultures. The aim of this paper is to explain the high corruption but fast economic growth puzzle in China by providing Örm-level evidence of the relation between corruption and growth and investigating how Önancial development ináuences the former relationship. Our empirical results show that corruption is likely to contribute to Örmsí growth. We further highlight the substitution relationship between corruption and Önancial development on Örm growth. This means that corruption appears not to be a vital constraint on Örm growth if Önancial markets are underdeveloped. However, pervasive corruption deters Örm growth where there are more developed Önancial markets. This implies that fast Örm growth will not be observed until a later stage of Chinaís development when Önancial markets are well-functioning and corruption is under control. Furthermore, the substitution relationship exists in the private and state-owned Örms. Geographically, similar results can be seen in the Southeast and Central regions.