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This article argues that under the traditional system of highly centralized state power, there exist various kinds of malpractices in the relationship between central and local government, and between government and other public sector organizations. The article affirms the positive effects achieved since 1978 by the reforms centered on "transferring power to a lower level and yielding some interests." But the article also points out that the malpractives of the traditional system have not yet been completely eradicated. At the same time, some new problems have arisen as a result of the reforms. So we must adopt the following measures: first, combine the powers and functions of the central government with the transfer of moderate degree of power to the local government; second, the transfer of administrative power from cental to local government should be coordinated with the transfer of economic power from government to enterprises; third, the division of powers and responsibilities between central and local government must be given a scientific and legal basis.