Abstract: Governing the people is the traditional function of the authoritarian state in China, but to adapt to the modern world, another function of governing public affairs needs to be strengthened and improved, which is called the modernization of the state system and state capacities. However, these two functions are usually difficult to separate, causing the conflicts between the functions which impede the modernization. This paper argues that the authoritarian state has a reform space for such conflicts on national public affairs. By the combination of centralized management and localized management, the governance of national public affairs is improved through expanding the governance function of central government and functioning the vertical-constraint mechanism. And also, such combination is not pre-designed, and sometimes even deviates from the central government’s initial goal. Instead, it is gradually established through the strategic interaction between central and local governments. Therefore, the authoritarian state in China has the potential to improve the governance capacity without changing the basic system of governing the people, which is introducing vertical-constraint mechanism on the governance of public affairs, including local and national.