Since the retreat of the workplace system, Chinese cities have been presented with the important challenge of refurbishing local administrative systems at the sub-district level while meeting the emerging needs of new urban spaces. Building on new institutionalism concepts such as conversion and layering, this study examines conditions in Shanghai to ascertain what has made it a strong administrative city. The study discusses the development of Shanghai's current local governance structure in terms of historical legacy, formal structure, and informal practices (i.e., two-tiered government and three-tiered management). This study also researches the complex stale task of strengthening sub-district governance (so-called "community construction") in urban China. The results of this study offer theoretical implications for institutional change and continuity related to these matters, thereby indicating that increased attention should he given to the agency-side explanation of endogenous institutional changes in the Chinese polity.