This chapter argues that the innovations in the governance of China are divergent from the conventional understanding of authoritarian regime about the centrality of political elites in policy initiation. Local governments in China often played a leading role whilst central government took a back seat as long as its political supremacy was not challenged. Contradicting the conventional wisdoms about the organizational inertia and change resistance of bureaucracies, local bureaucrats in China may be innovative in structural reform that entailed changing their work habit, restricting their authority, and undermining their sources of revenue as long as the reform was compatible with local agendas and incentives. The ambiguities of central policies provided room for local authorities to experiment their innovations. This paper concludes that the changing political, economic and social dimensions of China offer incentives to both central leaders and local officials for further innovations in the practices of governance.