Since the 1980s, China has achieved significant economic development by delegating the economic management authority to local governments. This decentralization has been especially evident in the implementation of foreign economic policy, known as the opening-up policy, where local governments play a crucial role. Consequently, many studies have examined the policy implementation process from a decentralization perspective. Previous research indicates that the opening-up policy can lead to conflicts between provincial and municipal governments. However, the intergovernmental relations in this context have not been thoroughly clarified. This study focuses on the relationship between Liaoning Province and Dalian City during the opening-up policy in the 1980s. It argues that intergovernmental conflicts were caused by attempts to modify vertical leadership relations between provincial and municipal bureaucratic sectors (tiao) and cross-sectoral relations among bureaucratic departments within municipal governments (kuai).

The opening-up policy was driven centrally and proceeded in tandem with urban economic reform. The central government delegated economic management authority to several municipal governments, including Dalian, by opening up coastal cities and through the separately listed city policy. However, intergovernmental relations were not fully considered, resulting in considerable confusion during policy implementation. To build a system conducive to foreign capital introduction, Dalian leaders established cross-departmental organizations within the municipal government, considering personnel arrangements to secure cooperation from each bureaucratic department. These organizations strengthened the unity of the kuai within the Dalian government. Conversely, the strong kuai within Dalian confused the vertical relationship (tiao) between the Liaoning Province and Dalian, leading to intergovernmental conflict over foreign trade. Other cities in Liaoning were dissatisfied with the concentration of foreign investment in Dalian. However, decentralization increased Dalian’s autonomy in economic management, making it difficult for Liaoning to maintain an economic balance within the province.

The analysis revealed that these intergovernmental conflicts were due to the municipal leaders’ attempts to reform the tiao-kuai relationship within the local bureaucracy. As lower-level governments are more inclined to strengthen the cohesion of the kuai, the central government’s delegation of authority to municipal governments without considering intergovernmental relations led municipal leaders to strengthen the kuai within their governments to facilitate foreign economy while weakening the tiao between provincial and municipal bureaucracies. This study suggests that the tiao-kuai relationship within the local bureaucracy holds the potential for intergovernmental conflict in implementing the opening-up policy.