This chapter focuses on education and language policies as sources of ethnic conflict in the reform era, focusing on Xinjiang where the problem has been most salient. Those sources of ethnic woes stem again from intensified tensions of the autonomous system, or the paradox of centralization and ethnicization. The driving force here is the state’s developmentalism in minority education: centralization inheres in the state’s expansion of higher education on the one hand and of bilingual education on the other, while ethnicization is manifest in the state’s intensified preferential policies to promote those goals. Expansion of higher and bilingual education for minorities aims at economic development and political integration. However, aided by preferential policies, this expansion has come up against the realities of the new market economy, which favors competitive skills and disadvantages minority students. Both processes – preferential policies for minority access to higher education but disadvantages for minority graduates in the market place – enhance ethnicization at the expense of integration.