ABSTRACT: Literature on China's urban development discusses the nature and role of the local state. A set of concepts have been proposed, such as the “entrepreneurial state” (ES) and “local developmental state,” and an ongoing debate attempts to ascertain whether the state is “entrepreneurial” in nature. This article uses a newly emerged urban phenomenon, chuangyi chanye jiju qu (CCJQs) or “creative industry clusters,” in which the central government is not involved, to explore the nature of local governments, their role in urban development, and the ways in which they perform this role. Both qualitative and quantitative research methods are used. The findings of this research reveal a strong revenue-oriented nature of local governments, highlighting the “entrepreneurial state” as an important dimension in their character: they transform spontaneously emerged urban cultural spaces into a new mechanism generating revenues for both urban growth and their own economic benefit. Local governments promote CCJQ development with place promotion strategies, and they are directly involved in CCJQ-related businesses as market players rather than as independent bodies that effectively control and regulate the CCJQ market through policies and regulations. Further, this article reveals a “public–public” coalition as an important mechanism for local state participation.