How does China create a FDI miracle？Based on the field research，the authors find that a large amount of FDI was actually attracted by the preferential policies from local governments. But why are local governments so eager to propose these great deals？According to the authors，this has to do with the rent seeking that runs in both ways between local governments and foreign enterprises. It is especially the reversed rent-seeking，in which the local governments seek rents from enterprises，that contributes most to attract FDI flow to China，for it not only checks the rampancy of rent seeking，but also pushes the governments to offer the preferential policies. This is how the FDI miracle is created. The paper then goes on to illustrate the incentives，bargaining processes and the aftermaths of the government-business interactions over the FDI. In this sense，the paper proposes a micro-level institutional analysis of how China blends in the world economy.