<p>Given the Chinese real estate industry’s high-leverage business model and government restrictions on secondary equity offerings, debt financing represents the predominant source of funding. In this study, we examine whether real estate firms utilize relationship spending in the form of entertainment and travel costs (ETC), encompassing both bribery and facilitation expenditures, to negotiate more favorable debt terms. Our findings consistently show that higher ETC is associated with lower cost of debt. We further account for voluntary disclosure of ETC with a Heckman selection model, and we mitigate potential endogeneity using a shock-based instrumental variable (IV) design based on an exogenous regulatory shock from China’s anti-corruption campaign. We next show that higher ETC facilitates larger loan approvals and longer maturities. In heterogeneous analyses, we show that the debt cost effects are strongest among state-owned enterprises, private firms with concentrated ownership, and firms with state-owned bank lenders. Taken together, our results suggest that Chinese real estate firms employ ETC as relational capital to lower financing costs and improve loan terms. In so doing, we extend prior evidence on bribery in bank lending by demonstrating how relationship spending operates in a sector with unique institutional features that is central to China’s financial stability.</p>