In Chapter 2, I situate the role of the Chinese bureaucracy in the larger institutional context of patrimonial and party-state domination, whereby bureaucratic power acquires legitimation from, and is subordinate to, the arbitrary power of the emperor or the ruling party. However, the authority relationship is neither static nor rigid; rather, it is realized through a process of constant readjustment. In this chapter, I take a closer look at the internal processes and develop a middle-ranged theory on the allocation of control rights across hierarchical levels and the resultant distinct modes of governance in the Chinese bureaucracy. The proposed theoretical model is intended to shed light on a defining characteristic of the institutional mechanisms in China’s governance, namely, the variable coupling across hierarchical levels and across central and local governments.