Abstract
Many studies have documented the very important role played by local officials in China in improving the business environment in order to promote better economic development. What has not been well studied is how local officials know when and how to improve their business environment. Using Kunshan, one of the most rapidly developing and most economically globalized county-level cities in the Yangtze Delta since the mid 1980s as a case, we argue that local officials in transitional China learn development experiences from the outside through interactions with foreign investors. In this respect, foreign direct investment in China is not only a vehicle for local economic growth but also a channel of knowledge diffusion for local institutional changes.
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