Based on a survey of rural school districts in Western China, this essay explores the effects of fiscal centralisation on the relationship between local governance and school district management, most particularly on how managerial power is distributed in the rural education sector. The essay also examines some of the possible effects that changes in managerial arrangements may have on teacher incentives and on educational quality as measured by student test scores. Our analysis suggests that teachers’ incentives and students’ education performance are unlikely to benefit from the excessive centralisation of decision-making power or from incessant horizontal level power struggles among different government bodies.