This article analyzes how China's increasing engagement in the global market induced significant institution-building in China's tobacco industry and enabled a power shift from the local authorities to the central authority in controlling this market. During this process of "getting onto the international track," the central government reorganized the industrial tobacco system and broke up the "monopolies" set up by local governments in order to enhance the competitive capacities of China's tobacco industry in the global market. Given such a concrete institutional change in China's tobacco industry, I propose the theory of "global-market building as state building" to explain the interactions among the global market, the nation-states, and the domestic marketbuilding projects. I suggest that nation-states strategically seek to engage themselves in the global market and that, under certain circumstances by taking advantage of their global market engagement, the nation-states can enhance their abilities to govern the domestic market.Since the 1990s, the growing interconnectedness of national economies has generated an expanding awareness of the so-called "globalization" and important debate on the changing nature of national governance driven by this globalization process. An issue of central significance in this debate is the impact of increasing economic openness and access to global markets on the nation-state's role in domestic institution-building and its capacity to govern the national economy. However, while much discussion involved in this globalization-state debate discloses numerous changes of the international environments and the resulting constraints that economic openness places on particular national policies, there is currently little knowledge of how national authorities themselves are taking advantage of the challenges of openness and managing their domestic institution-building to cope with increasing involvement in the globalization process. In particular, the debate Theor Soc (2009) 38:165-194