Tanking Kunshan as an example, the study inquires into the impacts of foreign investments on the local governance in costal China. Building on field data, this paper characterizes and analyzes the different patters of government0-business interactions between the Kunshan government and Taiwanese enterprises to show how the local state has been responding and adapting to the challenge of globalization. To be more specific, in Kunshan, the once dominant “partnership relationships” between local government and foreign enterprises has been shifted to a “developmental state.” Behind such process is a larger context where all the institutions have been shaping and reshaping by the global market.